How to Estimate Your Workers’ Comp Insurance Costs Using Class Codes and Prior Claims

Navigating the realm of insurance can often prove perplexing, and one of the most perplexing of all is workers’ compensation coverage. Several distinctive factors influence the determination of pricing for workers’ compensation, and this article aims to explain these elements, so you will have a clearer understanding of the costs involved. The five primary factors that wield substantial influence are Classification Codes; Loss History; EMR; Payroll and Location:

Classification Codes

Classification code is a four-digit code categorizing the nature of tasks performed by employees. For example, a roofer is classified as code 5551, while an administrative worker is categorized under code 8810. Each code carries a distinct premium rate, which is based upon the associated occupational risks and other pertinent considerations. Notably, occupations entailing higher risks, such as roofing, are subject to elevated premiums to account for their heightened exposure to workplace injuries.

Loss History

Loss history encompasses the historical record of all prior workers’ compensation claims filed by your employees. Typically, insurers scrutinize the most recent three-year period for assessing the significance of claims. The more substantial and frequent the claims, the greater the associated insurance costs. Unlike classification codes, evaluating loss history can be intricate. For instance, certain professions, like roofing, inherently entail a higher likelihood of claims, in contrast to industries with relatively lower risk profiles, such as law offices. Should a low-risk entity like a law office experience numerous minor claims in a short period of time, the policy might be non-renewed or the premium raised significantly.

Experience Modification Rate (EMR)

The Experience Modification Rate, commonly referred to as the “Mod Rate,” is the pivotal metric directly influenced by your prior claims history. Think of your mod rate like your credit score, except with an EMR, you want the number to be lower not higher. A higher EMR tends to result in elevated premiums, while a lower EMR can potentially yield reduced costs.

Payroll Allocation by Classification Code

Calculating the payroll distribution among various classification codes is integral to determining workers’ compensation premiums. This allocation is based on the proportion of your workforce engaged in each specific type of work. The premium for each category is computed by multiplying the payroll associated with the respective classification code by its corresponding rate.  Therefore, the payroll plays a large part in determining the pricing of your worker’s compensation policy.


Each state has its own rates for workers compensation.  For example, Alaska has some of the higher rates in the country, while Florida is far more reasonable.

In sum, comprehending the intricate dynamics underlying workers’ compensation pricing is pivotal for businesses seeking to effectively manage their insurance expenditures and mitigate potential financial risks. If you are looking for workers compensation coverage, call NPN Brokers today.  Our specialty is workers compensation insurance, from coast-to-coast.  We help tailor policies that fit your company’s budget and needs.  You have better things to worry about than EMR and Classifications Codes, because you have a business to run, let NPN Brokers help.