Other States don't Offer Claim-Free Discounts for Small Employers

Many private insurers offer claim‑free discounts on personal automobile and homeowners insurance. However, Washington is the only state with claim‑free discounts on workers' compensation insurance available to small employers. In other states, small employers are not experience rated for workers' compensation insurance, so they receive no discounts when they have few or no claims.

Private insurers in other states often have high fixed administrative expenses associated with issuing a workers' compensation insurance policy that make it difficult to offer discounts to small employers who pay relatively little premium per policy. These high fixed administrative expenses include the:

  • Cost of processing the application.
  • Cost of the underwriting decision to accept or reject the applicant.
  • Commission payments to the insurance agents.

Because of these high fixed expenses many private insurers are unwilling to sell workers' compensation insurance to small employers at all. When small employers are unable to get workers' compensation insurance from private insurers they must turn to assigned risk plans to get coverage as a last resort. Assigned risk plans often charge rates significantly higher than the base rates to avoid competing with the private market, so they are unwilling to provide discounts that would lower their rates.

Washington provides an actuarially appropriate claim‑free discount to all eligible employers because L&I:

  • Experience rates all employers with past experience.
  • Operate with low administrative expenses.
  • Serve employers regardless of size.

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