What does workers' compensation insurance cover?
Workers' compensation pays for the rehabilitation, recovery and medical bills of employees’ work-related injuries, as well as lost time when they are unable to work because of a work-related injury. Workers' compensation is not a substitute for health or medical insurance, since employees are only covered for on-the-job injuries.

Who has to get Workers Compensation coverage in Illinois?
In Illinois, virtually any business that has employees is required to meet their statutory Workers Compensation obligations by either getting an insurance policy, or by being approved as a self-insurer (only realistic for large companies) or by becoming a member of a group self-insurance program.
Executive officers of a corporation can elect to be excluded, if they wish, but this must be done by a specific endorsement to the policy.

If an employer knowingly and willfully fails to obtain insurance, he/she may be fined up to $500 for every day of noncompliance, with a minimum fine of $10,000.

What is the Assigned Risk Pool in Illinois?
Since the state requires employers to obtain Workers Compensation insurance a program has been established to make sure that any employer that needs coverage can obtain it, even if insurance companies don't want to voluntarily underwrite such insurance. That program is the Assigned Risk Plan, or Pool, and in Illinois there are some unique features that employers should know.

• First off all, rates are significantly higher in the Assigned Risk Plan in Illinois than they are in the voluntary market. The rates themselves are higher, typically 20% or 25% higher than the rates for the same operations in the voluntary market.
• Moreover, Assigned Risk policies have no Premium Discount. Depending on the size of the policy, this can add close to another 10% to the cost of the policy.

Furthermore, Assigned Risk policies are not eligible for any Schedule Credits. In the voluntary market, insurance companies have commonly offered discretionary discounts ranging from lows of 15% to highs of 50%.

When you add all these factors together you may find that the Assigned Risk Plan policy can often be twice as expensive as the same coverage in the voluntary market. This means that it is definitely in an employer’s interest to get out of the Assigned Risk Plan as quickly as possible.

Sometimes, small employers end up in the Assigned Risk Plan without even realizing it. You can check with your agent if your company is in the Assigned Risk Plan. As of today only two insurers participate in the plan: Travelers and Liberty Mutual, so if you have one of them it is possible that your policy has been written thru pool.

How are the premiums calculated?
Workers Compensation premiums are calculated by assigning classifications to the business operations. Each classification has a particular rate, which is applied to compensation (remuneration). The policy starts out with estimated compensation and then, when the policy ends, actual compensation is determined, and the policy premium is adjusted by an audit.

Premium is further adjusted, for companies paying $5,000 or more a year in premium, by application of the Experience Modification Factor. This factor, calculated annually by NCCI, is based on prior loss and payroll data of the particular business.

Premium can be adjusted, in the voluntary market, with Schedule Credits or Debits. Also in the voluntary market, the premium is reduced by applying a Premium Discount factor.

Workers’ compensation policies are expensive, and prices can vary widely based on the number of employees you have and on your specific industry. We recommend shopping around and comparing prices.
For example: If a company is doing carpentry under Assigned Risk Plan currently coverage would cost about 25.88% of employees’ payroll.
Our agency has contracts with insurance companies and would be able to provide coverage for the same line of work for about 18% and additionally you might be eligible for discounts up to 30%.

What type of information you need before shopping for worker's compensation insurance?
You definitely should know your estimated payroll for the coming year so the agent can determine the amount of coverage that you need. You also should have detailed descriptions of each employee's job responsibilities for classification purposes.
A construction company, for example, will pay a higher premium for a laborer than for a secretary.

What can employers do to get better rates?
You should implement good safety practices. With most policies, if the company doesn't have any claims in year one, then their premiums drop in year two. The company should have a written safety plan which can help prevent accidents. Worker's compensation is one of the few types of business insurance where the insured has some type of control over the rates.

David D. Thamann, J.D., CPCU, ARM; Diana B. Reitz, CPCU, AAI “Workers Compensation Guide: Interpretationand Analysis” The National Underwriter Company 2000
Wells Fargo  https://www.wellsfargo.com/biz/education/protection/workers_comp
Advanced Insurance Management http://www.cutcomp.com/illinois.htm
Illinois Workers' Compensation Commission www.state.il.us/agency/iic/insurance.htm