Workers' Comp. Premiums: Disparities in Penalties for Identical Losses
Publication: Journal of Construction Engineering and Management
Volume 123, Issue 3
Abstract
Workers' compensation insurance (WCI) is one of the largest controllable costs for construction contractors. A fixed portion of the WCI standard premium is determined by the individual contractor's company characteristics, including type of work performed, wage rates, and company size. The variable portion of the standard premium reflects the individual contractor's safety record or loss experience. The variable portion is really the sum of a number of surcharges or penalties, one for each actual loss the contractor experiences. This paper examines these penalties in detail. The paper shows that the magnitude of each penalty is based not just on the magnitude of the corresponding actual loss, but also on company characteristics. The result is that different contractors end up paying vastly different penalties for identical actual losses.
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Copyright © 1997 American Society of Civil Engineers.
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Published online: Sep 1, 1997
Published in print: Sep 1997
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