Six Ways Contractors Can Prepare for Higher Workers’ Compensation Rates

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

Over the last couple of months, we have published multiple articles and podcasts on the Workers’ Compensation Insurance Rating Bureau’s proposed rate increase and now the approved 8.7% increase to the pure premium rates effective 9/1/25. But, what we have not touched on are the specific steps our best-in-class contractors are doing to position their companies to offset these increases. They are:

1. Engaging with their advisor early in the renewal process. Contractors need to know exactly how this rate change will impact their specific class code. For 5506 Street/Road Contractors, the pure premium increase is 5%, but contractors performing dry utility work in class code 6325 Conduit Construction, it is increasing 26%.

2. Continuing to evaluate and update their companies’ risk control program.

3. Understand and managing their historical and future experience modification rate (EMR) . If their EMR is a debit mod (i.e., over 100), determine what is driving it upward?

4. Using KPIs to benchmark their frequency and severity against their peers’.

5. Analyzing both open and closed claims. They are looking for any lag times in claim reporting, and reviewing open claims on a consistent basis to manage open reserves. They identify the root causes of the incident and what they can do to prevent these types of claims from reoccurring in the future.

6. Evaluating alternative risk financing strategies like captives, retros or deductible workers’ compensation plans. 

So the question becomes, why do these best-in-class contractors take these proactive steps? One, they understand that losses unfortunately are inevitable but if there are processes and procedures that they can put in place to minimize the impact, they are willing to do it. The second reason is that they are bidding projects that potentially do not start for another 8-12 months and they want to factor in any increase in operating costs and protect their profitability.

To get started on these six steps to prepare for higher workers’ compensation rates, contact me at sclayton@ranchomesa.com or (619) 937-0167.