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What is Retro Plan for Workers
Workers compensation Retrospective Rating Plans are insurance policies with a built
in mechanism to allow employers to share in the financial risk and reward with
regard to their insurance coverage. Retro plans are typically designed for companies
that pay $250,000 or more for a standard workers comp policy.
In a nutshell, Retro Plans can shave up to 75% off traditional coverage or they can
significantly increase the cost of coverage depending on the actual losses during
the policy period. Retro plans can be beneficial for companies with low experience
mod's (credit modifiers), but they can also benefit companies with high modifiers
(debit modifier) if the business can reduce claim frequency and loss severity during
future policy periods.
Many insurance experts believe the workers compensation insurance market cycles
between a hard insurance market and a soft insurance market every 3 - 5 years.
Employers with larger insurance premiums often bear the burden of greater costs
during an hard market. Retro Plans can be a good tool to control insurance costs for
smart and stable employers with premiums over $250,000 per year.
Retrospective Rating has the potential for risk and reward. Many entrepreneurs
already understand the concept of retro plan coverage because they are used to
taking risks to reap financial reward.
A retrospective rating formula is determined by the insurance company after
reviewing prior loss history, class codes, and policy history. The formula is
predicated off of the Basic Premium, or no loss premium. The Basic Premium is the
starting point for the rating formula and is the minimum cost of coverage based on
zero claims during the period. The formula is then applied to the policy based on
the actual and reserved cost of claims as the policy moves forward.
Workers Compensation Shop.com offer front loaded Retro Plans that allow employers to
report and pay premium each month based on their actual payroll. The program
continuously monitors anticipated and actual losses and adjusts the net billing
rates based on the exposure and losses. Our Retro Plan is available to companies
with a standard premium of $250,000 and up. Not all companies will qualify.
Retrospective means to review the past or to apply to past events. Retro Plans are
designed to apply workers' compensation premium retrospectively to the past based on
actual incurred losses and claim costs during the policy period.
Retro plans place the insurance company into more of an administrative and policy
management role and reduces their risk by shifting a percentage of potential claim
costs to the employer. The insurance company is able to better predict their
overhead costs and potential claims costs which enables them to lower minimum
premium for coverage.
A Retrospective plan is not an actual workers compensation policy; its an
endorsement to a policy that includes the rating formulas used to calculate
premiums. The two most common types of Retro Plans include a) Incurred Loss Retro
Plans and b) Paid Loss Retro Plans.