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Workers’ Compensation Dividend Plans

A workers’ compensation dividend plan is a method where qualifying employers can share in the profitability of their account with the insurance company. Dividend plans are controlled by each state through legislation and department of insurance rules.

Employers who use these types of plans are compensated in the form of dividend payments based on how well their policy performed. Payment of dividends to workers’ compensation policyholders is a very common method used to adjust pricing of a policy after it expires.

There are a few types of dividend plans out there, but one of the most common is the sliding scale dividend. The policyholder will be compensated on a percentage of premiums based off a sliding scale of earned premium and loss ratio determined by the insurance company.

Eligibility requirements can vary from carrier to carrier, but some common requirements are:

– An employer’s earned premium must be at a specific minimum level.
– A minimum acceptable loss ratio is required. This is the total claims paid, including reserves, divided by the premium.
– Your policy must remain in force for the full policy period.
– All premiums must be current and paid before the dividend is due.

There are many factors to consider when looking at a workers’ compensation dividend plan:

– Employers may realize a savings in premium for each claim dollar saved.
– Dividends promote a financial incentive to help promote safety and injury prevention.
– Dividends can only reduce the price of a policy; there is typically no penalty to the employer for excessive or large claims other than not qualifying for the dividend.
– Not all insurance companies offer dividend plans and not all agents have access to carriers that offer them.
– Dividends cannot be legally guaranteed. Dividends are subject to approval by the Boards of Directors and may be dependent on the profitability of workers’ compensation within the state.
– Individual state legislation and insurance department rules outline how dividend plans can be marketed to employers.
– Payment of past dividends is not a guarantee of future dividend payment.



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