Understanding workers’ compensation insurance rates

The first, and often biggest, factor in determining your workers’ compensation insurance rate is the type of work your employees do. Every type of job carries its own level of risk.

Higher-risk industries such as construction, manufacturing, and trucking typically pay higher rates because workplace injuries are more likely to occur.

Lower-risk industries such as professional services or retail usually see lower rates due to seeing fewer on-the-job hazards.

Even within the same industry, rates can vary. Factors like company size, safety practices, and claims history can all influence your rate. A business with a strong safety record and effective injury prevention programs may see more favorable premiums than a competitor with frequent claims.

Workers’ compensation is regulated at the state level, which means rates can differ dramatically depending on where your employees work.

Some states allow private insurers to compete for business, which helps keep pricing flexible.

Others, known as monopolistic states, require employers to buy coverage directly from a state-run entity.

Each state sets its own base rates for various job classifications, often using data from the National Council on Compensation Insurance (NCCI) or a similar organization. Insurers then adjust these base rates based on company-specific factors such as claims experience, payroll size, and safety record.

While your industry and location set the foundation for your company’s workers’ compensation rate, your company’s ongoing performance plays a major role too.

One of the biggest variables is your Experience Modification Rate (EMR): a numeric factor that reflects your company’s safety and claims history.

• A lower EMR (below 1.0) indicates fewer or less severe claims than the average company in your industry, which can reduce your premium.

• A higher EMR (above 1.00) indicates more frequent or more severe claims than the average company in your industry, which can increase your premium.

Employers that invest in safety programs, employee training, and regular workplace inspections often see fewer injuries. Over time, those improvements can help keep workers’ compensation rates lower.

Promptly reporting injuries, maintaining open communication with your insurer, and supporting employees’ safe return to work can also improve your long-term claims profile.

Because so many factors go into determining workers’ compensation rates, understanding your true costs can feel complicated. That’s where we come in.

At Sentry, we work alongside business owners and decision-makers to explain how rates are calculated, identify ways to improve safety and control costs, and tailor coverage to your company’s unique needs.

Our goal is to help you protect your employees, stay compliant, and build a safer, stronger workplace.