Beyond Premiums to Total Cost of Risk
When reviewing workers’ compensation quotes, it’s easy to gravitate toward the lowest number on the page. But a low premium doesn’t always represent low cost—or low risk.
At Vantage Point Risk, we’re Certified WorkComp Advisors. That means our approach goes beyond rate shopping. We examine your total risk profile and the long-term financial impact of each quote through a Total Cost of Risk (TCOR) framework.
This article breaks down what drives differences between quotes, what’s at risk when a quote is based on inaccurate data, and how to make better decisions using TCOR—not just premium pricing.
What Goes Into a Workers’ Compensation Quote?
Workers’ comp isn’t a one-size-fits-all product. It’s a pricing model built on several key variables:
- Payroll Estimates: Projected gross wages for each employee, broken out by role
- Classification Codes: Job codes assigned based on the physical risk of the work
- Experience Modification Rate (EMR): A calculation of your company’s historical loss performance
- Adjustments and Credits: Carrier-specific underwriting variables, such as safety program discounts or schedule debits
The combination of these elements determines your base premium. But if even one is wrong or missing, the numbers become unreliable—and potentially dangerous.
Why a Lower Quote Might Be a Red Flag
If one quote comes in significantly cheaper than the others, ask why. There are four common reasons:
- The payroll is underestimated
- The employees are misclassified under lower-risk codes
- The mod is calculated incorrectly or omitted
- Coverage is limited or specific exposures are excluded
These issues often point to incorrect assumptions, not better pricing. And the consequences can be severe.
The Risks of Choosing the Wrong Quote
A policy that’s structured on inaccurate or incomplete data might look good today, but it creates major exposure over time.
Audit Adjustments
If you report $500,000 in payroll but actually run $700,000, you’ll owe the difference during the audit. That bill could arrive months later—and you’ll be expected to pay immediately.
Claims Delays or Denials
If a field worker is misclassified as clerical and they’re injured on the job, the carrier may dispute the claim. That slows down care for the employee and increases legal exposure for you.
Higher Long-Term Premiums
One claim in the wrong classification code could inflate your mod, raising your premium for up to three years. The cheap quote today becomes an expensive problem tomorrow.
Loss of Market Access
If your account is flagged for frequent audit corrections or suspicious discrepancies, you may be excluded from quoting with preferred carriers going forward.
Administrative Headaches
The time and effort it takes to correct misquotes, respond to audit disputes, or challenge coverage gaps adds internal cost—pulling your focus away from business operations.
What Is Total Cost of Risk?
Total Cost of Risk (TCOR) includes more than just your premium. It’s a comprehensive view of all the direct and indirect costs associated with insurable and non-insurable workplace risks. It accounts for:
- Insurance premiums
- Claims payouts and retained losses
- Administrative and legal costs
- Productivity losses and downtime
- Reputational impact and lost opportunities
Choosing a quote without considering TCOR is like picking a tool based solely on price—without checking if it can handle the job safely and effectively.
What Should You Ask When Comparing Quotes?
To properly evaluate multiple quotes, make sure you review:
- How payroll was calculated for each role
- Which class codes were used, and whether they’re accurate
- Whether executive officers are included or excluded
- How subcontractors are handled, and whether their COIs are verified
- What enhancements or exclusions are present in the policy
- Whether the experience mod used is correct and current
- If the insurer provides claims support, safety services, or loss control
If any of these items are unclear, the quote should be re-evaluated with your broker—or better yet, a Certified WorkComp Advisor.
Real-World Scenarios: When Cheap Becomes Costly
Consider a contracting firm that accepts the lowest quote, unaware that it excludes subcontractors. Months later, a subcontractor suffers an injury onsite. With no coverage in place and no valid COI, the company is forced to pay out-of-pocket.
In another example, a firm underestimates payroll by 30% to reduce their upfront premium. The year-end audit reveals the discrepancy. They’re issued an unexpected invoice for more than $9,000—due in 10 days.
These aren’t rare edge cases. They happen every year, across Oregon, Washington, and the Pacific Northwest.
Why TCOR Is the Right Lens for Workers’ Comp
Premium savings are appealing. But if the quote doesn’t reflect your actual business exposure, you’re not saving—you’re deferring risk.
Let’s break down some hidden costs that impact TCOR:
- Poor Claims Handling: Longer claim durations increase both payout and time away from work.
- Audit Surprises: Underreporting leads to large, unbudgeted expenses.
- Coverage Gaps: Missing or excluded exposures leave you financially vulnerable in the event of a claim.
- Reputational Damage: Claims disputes with employees hurt morale and retention.
- Management Distraction: Dealing with claims fallout or audit stress diverts leadership focus.
All of these outcomes increase the actual cost of risk, regardless of how “cheap” the policy appeared at the outset.
How Vantage Point Risk Approaches Workers’ Comp Differently
As Certified WorkComp Advisors, we’re not just insurance brokers—we’re risk engineers. Our process is designed to prevent the exact pitfalls discussed above.
Here’s how we help you build a quote you can trust:
- Accurate Class Code Reviews
We verify every role in your organization to ensure proper classification. - Payroll Forecasting Tools
We work with your actual wage trends—not guesswork—to project realistic estimates. - Mod Factor Analysis
We proactively assess your experience mod, its drivers, and opportunities for improvement. - Coverage Structuring
We ensure executive, subcontractor, and part-time exposures are accounted for and aligned with your risk tolerance. - Carrier Strategy
We match you with insurers based on claims service, audit support, and stability—not just price. - Ongoing Support
From quarterly check-ins to claim advocacy, we’re engaged throughout the policy year—not just at renewal.
Final Thoughts: Don’t Let Price Blind You to Risk
There’s nothing wrong with wanting a competitive premium. But that number should never come at the expense of accuracy, coverage, or audit integrity.
At Vantage Point Risk, we help employers take a strategic view of their workers’ compensation program—focusing not just on the lowest number, but on the lowest risk-adjusted cost.
If you’re evaluating workers’ comp quotes and want to avoid surprises at audit or in a claim scenario, we’re ready to help.
