Marijuana Workers Compensation Insurance

As a marijuana business owner you need to take the proper measures to ensure workplace safety. However, accidents occur even in the safest workplaces. To be prepared for employee accidents, as an employer you must have workers compensation as part of your marijuana business insurance program.

Workers compensation insurance provides benefits to workers who are injured on the job in the workplace premises or away from the workplace on the course and scope of performing their duties. Injured workers will receive medical treatment and disability benefits if they are off the job due to their injury. The insurance will also provide you important legal protections as well.

It's important for you to understand what is covered by your marijuana business’ workers compensation insurance policy. Each state has varying statutes regarding workers' compensation and each state determines what injuries are covered and to what extent. They also determine how much coverage employers should purchase. If your marijuana business expands to other states you must consider the different rules of each state that you will operate in.

Workers who are injured receive the necessary medical treatment. There are several guidelines that outline what treatments and diagnostic tests are considered as necessary. Benefits for income replacement are based on whether the employee's disability is temporary or permanent. Although some states allow the benefits to be paid for the entire length of the disability, some place limits on the amount of time that benefits can last.

You might wonder if it is required for you to carry workers compensation coverage or not. In most cases, unless employees are paid on commission or they are company partners, you will need to purchase workers compensation coverage.

There are many factors that play a part in your workers compensation insurance rate.  The following factors will influence your marijuana workers compensation rate:

• The market are you in: Because of the newness of the industry and marijuana still being listed as a Schedule 1 substance there are not many companies offering workers compensation for marijuana businesses in the open or general commercial market (called the voluntary market). The only option available for marijuana businesses at this time is through the ‘Assigned Risk’ market, which is known as "the pool".
• The size of your payroll: Your marijuana workers compensation insurance rate is determined by taking your payroll in the various classifications of job responsibilities within the business and multiply it by a rate per every $100 of remuneration. The premium you pay is based in part on payroll which is estimated at the beginning of the policy year, the final premium could be more or less, depending on your actual payroll expenses reported at the end of the year. Adjustments are made at that time, resulting in either a refund or an additional bill.
• Your classification: Businesses are assigned rates according to industrial categories called classifications. Classifications are tied to risk factors, or the recognized potential for loss within a particular industry. There are close to over 800 risk classifications. Marijuana business classifications range from employment settings such as producers, processors, wholesalers, retailers, laboratories and more.
• The Modification (MOD) factor or Experience Rating: A company called National Council on Compensation Insurance collects premium and loss data. The Experience Modification is one of the critical components of the premium calculation. The Experience MOD is a calculation that compares your actual losses to the average losses of businesses like yours.  Your workers compensation premium calculation will look like this:  Rate x Exposure (Gross Payroll) x Experience MOD = Premium

Application of the Experience MOD factor in the ratemaking formula will either result in a premium that is lower (a debit) or a premium that is higher (a credit).

An Experience MOD greater than 1.0 means your losses are worse than expected and your premium will increase. An Experience MOD less than 1.0 means losses are better than expected, resulting in a premium decrease. For example if you have an experience modification of 1.20 the Experience MOD is multiplied by your gross premium. So, a 1.20 modification factor increases your marijuana business workers compensation insurance rates by 20%.

The Experience MOD is calculated using claim data from the three most recently completed years, excluding the expiring term. To determine your 2014 Experience MOD, payrolls and claims from 2010, 2011 and 2012 will be included. First, each claim incurred (paid plus reserved) value is listed. Your Experience Rating / Modification factor is determined by the following:

• Accident Frequency – frequency is a measure of how many accidents a business has had during the experience period. Accident frequency is a better indication of future losses and is the more important of the factors when it comes to the rating.
• Accident Severity – severity measures the cost of any accidents that have occurred.
  
  

A business with one $10,000 claim will fare better than one with five $2,000 claims. In spite of the equal dollar amount, the second business is more prone to claims. In some states only a percent of the 'medical only' claims are used in the formula, further adjusting the calculation which puts more weight on frequency of claims than severity of claims.

Finally, these adjusted claims are compared to the expected losses for the class and size of your business, which determines the Experience MOD assigned to your business.

As you can see there are a few moving parts that come into play and contribute to your marijuana business workers compensation insurance rate.

I specialize in marijuana business insurance, if you’re interested in discussing marijuana business insurance or would like to receive a workers compensation quote for your business please call me at (503)-922-4847 or select “Request a Quote” below.

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