Simploy Testimonial
Simploy Testimonial
Workers' Compensation Insurance
Premium Audit Specialists
Featured In
Workers Comp Insurance Rates (2025)
This article is a business leader's guide to:
-
Work Comp Rate determination
-
How workers' compensation insurance companies tier their wc rates
-
How to get the best workers compensation rates
-
How you can learn what your competitors are paying
Most online sources mistakenly use "work comp rates" and "work comp premiums" interchangeably. Workers compensation premiums are what you pay for workers compensation. Rates are just one variable in the workers comp pricing formula (insurance nerds say algorithm).
If you wish to review how workers comp premiums (including rates) are determined, we have a resource explaining how is work comp premium calculated.
In this article we cover the following:
FAQ: How Are Workers Comp Rates Determined?
Tiered Workers Comp Rate System
Human Optimized Workers Comp Rate Quotes
What Is The Other Guy Paying?
What Is The Other Guy Paying? Competitor Intelligence
If you're not quite ready to take your account to market but want some reassurance you're not overpaying, we can provide competitor intelligence. With the name and website of any of your competitors we can provide you with the following:
-
Their Governing Class Code. The workers comp class code assigned to your competitor's primary business activity (where the most it's payroll and premium is derived).
-
Additional work comp codes assigned to the policy; companion codes and standard exceptions.
-
Their name of their workers' compensation insurance carrier and the rate your competitor is charged for its Governing Class Code.
Note: We may or may not be able to obtain some or all of this information in independent bureau states. And, there may be a few exceptions in NCCI states. For example, a business purchases workers compensation insurance through a PEO.
Stuart Cytron ● stuart@cytrongroup.com ● 314.757.8079 ● Sitemap
© 2025 by Cytron Group LLC.
How Are Workers Comp Rates Determined?
There are 2 components of workers comp rates:
-
Loss Costs
-
Loss Cost Multipliers (LCMs)
Loss costs are determined by the designated Rating Bureau in each state.; NCCI in 35 states. Loss cost multipliers are determined by each individual insurance company.
-
Workers Compensation Loss Costs
Rating Bureau's like NCCI are repositories for all of the insurance company data. For example, your workers comp insurance company sends the Rating Bureau your payroll and to what workers comp class codes that payroll is assigned . In addition, the carrier sends all of your claims data (and more).
Then, NCCI will take all the payroll in each state and break it down into groups by wc class code. So, it knows how much payroll is assigned to each workers comp class code in every state.
The other piece is claims. Every workers compensation claim also belongs to a work comp class code based on how the injured worker is classified. NCCI will calculate how many dollars were spent to pay workers comp claims in every classification code in every state they serve.
With this data NCCI can calculate a Loss Cost for every classification code. Loss Cost = How much an insurance company can expect to pay in claims for every $100 of workers comp payroll per class code.
-
Loss Cost Multipliers
Loss Cost Multipliers (LCMs) are determined by the insurance companies for their own use. These are what account for differences in workers compensation rates between carriers.
Briefly, LCMs "mark up" Loss Costs by adding to the rating bureau's Loss Costs the remaining projected costs of doing business. Here is a list of those items from an insurance company filing for 2025:
-
Total Commission
-
General Expenses
-
Other Acquisition Expenses
-
Taxes, Licenses, and Fees
-
Premium Discount (net of Expense Constant)
-
Reinsurance Costs
-
Residual Market Costs
-
Profit Provision
All workers' compensation insurance companies will file their LCMs to arrive at their final workers comp rates. An LCM will be a number like 1.35 or 1.74 or 2.05 which will be multiplied against the Loss Costs in every workers comp code to arrive at final workers compensation rates.
-
Workers Comp Rate Determination
If an insurance company determines that it needs an additional 64% on top of Loss Costs, it's workers comp rate calculations will be as follows:
Workers Compensation Classification Code ABCD
Loss Cost = $1.75 per $100 payroll
Loss Cost Multiplier = 1.64
Workers Compensation Rate = $2.87 (1.75 x 1.64)
Based on how workers compensation rates are determined, it appears that insurers have little flexibility in the prices they can offer you. They receive loss costs from a rating bureau, file their loss cost multiplier and rates with the state. Then, generally speaking, prices are fixed until the following year; when loss costs are revised and they refile their rates.
That is how the system was designed to work.
One thing among many that insurance regulators protect against is discriminatory pricing. They don't want workers compensation insurance carriers charging 10 similar businesses (e.g. say all 10 are workers comp code 5437 Carpentery Contractors) 10 different rates.
Without this flexibility to "tier" their rates, work comp insurance companies came up with a workaround to escape this limitation. They create multiple companies (underwriting companies) who all file different Loss Cost Multipliers and rates. For example, here are 11 Travelers underwriting companies that I was able to quickly identify online:
-
Travelers Casualty Insurance Company of America
-
Travelers Property Casualty Company of America
-
The Travelers Indemnity Company of America
-
Farmington Casualty Company
-
The Charter Oak Fire Insurance Company
-
The Phoenix Insurance Company
-
The Standard Fire Insurance Company
-
The Travelers Indemnity Company
-
The Travelers Indemnity Company Of Connecticut
-
Travelers Casualty Insurance Company of America
-
Travelers Casualty and Surety Company
All of these will file different LCMs and different rates. The carrier is effectively able to offer different rates to similar risks by establishing multiple legal entities. "We (XYZ Insurance Company) aren't charging your competitor less. That's XYZ Casualty Company."
By the way, I'm not picking on Travelers. All insurance companies do the same because this is allowed. But, one company offering tiered rates is not. And, this is how you could have multiple companies in the same industry and insured, seemingly, through the same "company" paying different prices.
Tiered Workers Comp Rate System
Human Optimized Workers Comp Rate Quotes
Technology + Expertise
There are a number of reasons why I don't suggest exclusively using an online tool to buy your workers compensation insurance. You need a human (broker or agent) rather than technology alone to optimize your submission for you; that's why I say "human optimized."
One good reason (of many) is that your business has a story to tell. That story should have something to do with why your account is not as risky as it appears, and why you deserve lower workers comp rates (premiums). You can't explain that story to an underwriter through an online application. You need a human to optimize this submission for you with underwriters. For example:
-
You have claims that aren't your employees' fault that will be successfully subrogated
-
Injuries from motor vehicle accidents where your drivers were struck
-
"We've been claim free for 2 years and no rate decrease"
-
New safety protocols
-
You hired a Safety Manager
-
Etc.
If you review the above section "Tiered Workers Comp Rate Quotes," you should know that the assistance of a broker could determine the placement in a more favorable underwriting company. And, that it is only one of a few ways an insurance company can "massage" pricing.
I've never seen a study suggesting online workers comp rate quotes are more competitive and my gut tells me there's a reason for that; they're not.
We can provide you with Human Optimized Workers Comp Rate Quotes
If you're interested in really taking your account to market to see how much money you could save, we have an start-a-quote application for you. Upon review we'll be in touch before running your submission through our underwriting platform where we let technology communicate with scores of insurance companies. Then, everything is back in the hands of experts to obtain the best possible proposal for you.
