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Today’s Agenda Types of Injuries Illinois WC Benefits
Workers Comp and Employers Liability Policy WC Rating Bureaus and Pricing Environments Rating Plans for WC Policies Payroll vs. Hours Worked Industry Trends
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Types of Injuries Fatal Permanent Total Permanent Partial
Temporary Total Medical Only
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Illinois WC Benefits Illinois WC Law First Effective 5/1/1912
State Average Weekly Wage (SAWW) = $717.24 Survivors’ Benefits Burial Benefit: $4,200 66 2/3% of AWW w/ COLA Min Weekly Benefit: Lesser of $ or AWW Max Weekly Benefit: $956.32 Max Lifetime: Greater of $250,000 or 20yrs Remarriage “Award”: 2yrs Lump Sum w/o children
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Illinois WC Benefits (continued)
Permanent Total Disability 66 2/3% of AWW w/ COLA Min Weekly Benefit: Lesser of $ or AWW Max Weekly Benefit: $956.32 Max Lifetime: Unlimited Temporary Total Disability 66 2/3% of AWW 3 Workday waiting period/14 day retroactive period Min Weekly Benefit: Lesser of $113.40* or AWW *Assumes Married, 2 children
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Illinois WC Benefits (continued)
Permanent Partial Disability 60% of AWW Min Weekly Benefit: Lesser of $88.90* or AWW Max Weekly Benefit: $ or $956.32** Duration: Non-Schedule: % of disability * 500 wks Schedule: Thumb 70 wks Hand wks Foot 155 wks Leg wks Hearing Both Ears 200 wks *Assumes Married, 2 children **$ paid if amputation or enucleation occurs
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Workers Compensation and Employers Liability Insurance Policy
Information Page General Section Part One - Workers Compensation Insurance Part Two - Employers Liability Insurance Part Three - Other States Insurance Part Four - Your Duties if Injury Occurs Part Five - Premium Part Six - Conditions
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Information Page 1 Describes insured 2 Shows coverage period
3 Summarizes coverages 4 Premium estimate Classification, estimated payroll, rate
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General Section The Policy Who is Insured Workers Compensation Law
State Locations
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Part One - Workers Compensation
A. How This Insurance Applies Bodily injury by accident must occur during the policy period Bodily injury by disease must be caused or aggravated by conditions of your employment. The employee’s last day of exposure to the conditions causing or aggravating such bodily injury must occur during the policy period. B. We Will Pay Benefits required by workers compensation law C. We Will Defend D. We Will Also Pay Insured’s expenses Bonds and interest on judgments
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What is “Workers Compensation Law”?
What WC Law is: WC Law in each state listed in Item 3A Any amendments to the law during the policy period What WC Law is not: Federal WC Law Federal occupational disease law Any law that provides nonoccupational disability benefits
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Part One - continued E. Other Insurance F. Payments You Must Make Payments in excess of regular benefits required because: Serious or willful misconduct Hiring an employee in violation of law Failure to comply with safety regulations Discharge, coerce or discriminate against employee G. Recovery From Others H. Statutory Provisions Your default or the bankruptcy or insolvency of you or your estate will not relieve us of our duties under this insurance after an injury occurs.
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Part 2 -Employer Liability Insurance
Need for coverage Third-party-over suits Care and loss of services Consequential bodily injury Dual capacity Exclusions Outside the US or Canada Liability assumed under contract Punitive damages for illegally employed person Bodily injury intentionally caused by insured Damages from employment practices
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Part 2 -Employer Liability Insurance
Exclusions (Continued) USLH & Extensions FELA Injuries to members of the crew of any vessel Limits of Liability Basic Limits $100,000 – BI by Accident, Each Accident $100,000 – BI by Disease, Each Employee $500,000 – BI by Disease, Policy Limit Increased limits can be obtained for additional premium NY – Unlimited EL Coverage
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WC and Employers’ Liability Policy
Part 3 - Other States Insurance Part 4 - Duties If Injury Occurs Part 5 - Premium Recordkeeping requirements Adjusted premiums Part 6 - Conditions Inspection Assignment Cancellation
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Additional Coverages Available by Endorsement
USLH and Extensions “F” Classes Other Classes FELA, MSAWPA, and Admiralty Law Basic EL Coverage ($25,000 per accident) Basic EL Coverage + Voluntary State Benefits Basic EL Coverage + Voluntary USLH Benefits
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WC Rating Bureaus Functions Types Develop Loss Costs & Rates
Develop Policy Forms & Endorsements Advise states on WC issues Types National Council on Compensation Insurance (NCCI) Independent Rating Bureaus
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Pricing Environments Administrated Pricing Competitive Pricing
Rates are filed by Rating Bureau Carriers may be permitted to deviate from rates Competitive Pricing Rating Bureau files “Loss Costs” Carriers load in their own expenses & loss experience adjustments
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Rating Plans for WC Policies
Guaranteed Cost Loss Sensitive Retrospectively Rated Policies Large Deductible Policies
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Components of a WC Premium
Manual Premium (Exposure * Rate) Employers Liability Increased Limit Experience Credit/Debit Schedule Credit/Debit Contractors Classification Premium Adjustment Program (CCPAP) Balance to Minimum Premium Premium Discount Expense Constant
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Retrospectively Rated Policies
Final Premium Determined by Insured’s Losses and insurer’s expenses Losses are 18 months and every 12 months afterwards Optional Min and Max Premium Optional Per Loss Capping
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Large Deductible Policies
Deductibles of $100,000 per claim or greater Policy aggregates can be available Insurer pays first then recovers from insured Insurer or TPA handles claims Cash Flow Advantages Reduced Tax Liability
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Dividend Plans Dividends must be declared by the Board of Directors
Types of Dividend plans Level Flat percentage of premium is returned to the policyholder Payout may or may not be dependent on the loss experience of the insured Variable The percentage of premium returned to the policyholder is determined by the loss experience of the insured Retention Plans
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Payroll vs. Hours Worked
Payroll is currently used as the exposure base for WC (except in WA) Argument for using Payroll Inflation sensitive Indemnity benefits determined by wage level Easily verifiable Arguments against using Payroll Unfair to employers who pay a higher hourly wage Indemnity benefits a percentage of the SAWW Medical payments do not vary by wage level
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Payroll vs. Hours Worked
Solutions Classification Refinement Experience Rating CCPAP Credits
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Industry Trends Flat Loss Costs High Degree of Competition
Frequency Decrease High Degree of Competition Federal Intervention Assault on Exclusive Remedy Rollback on WC Reforms enacted in the early 1990s
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Industry Accident Year Results
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