What is a key factor in how workers compensation premiums are calculated?

A key factor in calculating workers' compensation premiums is the type of industry and its associated risks. Different industries have varying levels of risk associated with them, which directly impacts the potential for workplace injuries and claims. For example, jobs in construction or manufacturing typically face higher risks than those in clerical or administrative positions. This variation in risk is assessed through classification codes that determine how much premium an employer must pay based on the likelihood of claims occurring in their specific industry.

The classification system reflects statistics and historical data regarding the frequency and severity of workplace injuries within those industries. Therefore, insurers use this data to determine premiums—industries that are deemed more hazardous will generally incur higher premiums to account for the increased likelihood of work-related injuries.