How We Calculate Your Premium

Like all workers' compensation insurance carriers, we estimate and audit your premium based on your company's:

Other factors may also influence your workers' compensation premium, such as:

Group discount programs
Subrogation (third-party recoveries)
Claimant fraud and premium fraud

Estimated premium
We estimate a premium at the beginning of each annual policy, and you pay 100 percent of the premium, unless you arrange for premium financing or we place your account in interim payroll reporting.

Premium audit
At the end of the policy period, we conduct a premium audit to make sure you were charged the right amount for coverage provided. The premium audit double-checks your payroll records and makes sure your employees are classified correctly. An adjustment might be necessary — you may owe more money or you may get some back.

Sometimes, we conduct mid-term audits if there are questions about payroll estimates or classifications. Mid-term audits also may be done if the nature of your business changes drastically.

Classification codes
Some kinds of work naturally have a higher exposure to risk for workplace injuries. Your premiums are based in part on the risk associated with your type of business.

To ensure that you pay a fair price for your level of risk, we are required by law to use the Texas Department of Insurance's classification code system. This system groups you into a classification code that reflects the exposure of employers with similar operations.

Each classification code has a corresponding premium rate based on each $100 of payroll. To estimate your annual premium, we apply the rate to the payroll of all employees assigned to that classification.

We will use the appropriate classification code for your business. If we're unsure about a classification, we might conduct a site visit or pre-audit survey and ask the Texas Department of Insurance to confirm the classification.

Experience modifiers
Experience modifiers (e-mods) are designed to give businesses a financial incentive for maintaining safer workplaces. Modifiers predict an employer's future losses by looking at their past loss experience. E-mods, as they are sometimes called, are a standard industry calculation used by all carriers to adjust a premium. Employers with better than average losses are rewarded and employers with worse than average losses are penalized.

The National Council on Compensation Insurance (NCCI) calculates
e-mods based on payroll and claim information for the three past policy years, not including the most recent past policy period.

We compare your actual losses with the expected losses for other businesses with similar job classifications and payrolls to give you a credit (reduction in premium) if your losses are less than expected, or a debit (increase in premium) if losses are higher than expected. A credit modifier is expressed as a number less than 1.0, and a debit modifier is greater than 1.0.

You can improve your e-mod by maintaining a safer workplace. Developing safety measures that prevent many small to medium-sized claims can also help because frequent claims can affect modifiers more than one high-cost claim.

Subrogation
If a third party causes your employee’s injury or illness, we may recover the expenses from the third party through a legal process called subrogation. Third-party recoveries can reduce the premium you pay when you renew your policy by:

Reducing your experience modifier
Reducing claim reserves

Prevention of premium fraud
Premium fraud is the knowing or intentional misrepresentation or omission of any information necessary to determine an accurate premium. Premium fraud, like claim fraud, contributes to higher workers' compensation insurance rates. We fight fraud to help make the system fair for everyone.

If you are a policyholder and want more information about your premium, please call (800) 859-5995.