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Sub Contracts

 
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Old 12-03-2004, 04:09 PM   #21
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Re: Sub Contracts


In the roofing business insurance is the biggest killer. I don't know this for sure, but I have heard that there is a point f no return. Once you add a certain number of employees, or hit a certian dollar ammount in payroll your rates actually go up per man.

I have eavesdropped on conversations where large companies setup a second smaller company. They then pay half their employees under the second company name and treat the second company as a sub to the first company. They do this to avoid that insurance point of no return.

I can't vouch for that point of no return as being 100% valid. It could just be an urban myth
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Old 12-03-2004, 05:57 PM   #22
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Re: Sub Contracts


Most increases or decreases in insurance is based on your EMR (experience modification rate). But honestly I don't know about the point of no return.
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Old 12-03-2004, 06:04 PM   #23
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Re: Sub Contracts


Good sub, Bad sub I feel it all boils down to one word......loyalty.

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Old 12-03-2004, 06:23 PM   #24
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Re: Sub Contracts


EMR (experience modification rate) -never heard of that, can you elaborate?
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Old 12-03-2004, 06:52 PM   #25
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Re: Sub Contracts


It's basically a scheme by which the insurance industry can collude in terms of fixing the "basic" or "neutral" worker's compensation premium and afford contractors the ability to lower the premium by demonstrating lower than average losses. The neutral EMR (or experience mod) at which companies initially purchase insurance upon start-up is a multiplier value of 1. The EMR is modified (I think at year 4) to reflect the contractor's ratio between the actual losses experienced and those expected by the insurer. As losses increase above the expected rate of loss then the EMR moves above 1 and serves to raise the effective premium. As losses fall below those expected the EMR moves below 1 and serves as a discount to the basic premium.
The experience mod is calculated using various data from three consecutive years beginning four years before the current year.
Frequency of loss also impacts the EMR. So a company with repeated small losses may in fact pay higher premiums then a firm with only one big loss (insurance companies must figure "the big one" is bound to hit if there are a lot of little ones).
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Old 12-03-2004, 08:09 PM   #26
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Re: Sub Contracts


Good description PipeGuy - but I believe the initial EMR is set by the type of business you do. i.e. a steep roofing contractor is higher than a flooring contractor. We require an EMR of less than 1.0 (if I remember correctly) on all government projects and below 1.2 for most everything else.
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Old 12-03-2004, 08:22 PM   #27
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Re: Sub Contracts


I should also say - EMR is used for Work comp rates. Other insurances will use an incidence rate which can be figured by (Number of lost time accidents per 100 employees (or days lost per year per 100 employees) X 200,000) / total employee hours per year
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Old 12-03-2004, 09:39 PM   #28
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Re: Sub Contracts


Quote:
Originally Posted by hatchet
Other insurances will use an incidence rate which can be figured by (Number of lost time accidents per 100 employees (or days lost per year per 100 employees) X 200,000) / total employee hours per year
I didn't know that. What other insurances - GL and inland marine type policies? I can see why the premiums are impacted by incidence rates but I wonder why they're tied to lost time and manhours rather than dollar value of claim?
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Old 12-04-2004, 01:09 AM   #29
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Re: Sub Contracts


They base it on manhours to account for all lost time accidents - and not just doctors cases where there is money involved. I believe their reasoning is that if the workplace is unsafe or unsatisfactory there will be more sickness and time away from work - so they account for it like that.
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Old 12-04-2004, 10:29 AM   #30
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Re: Sub Contracts


Quote:
Originally Posted by PipeGuy
It's basically a scheme by which the insurance industry can collude in terms of fixing the "basic" or "neutral" worker's compensation premium
I'm confused, from the description you guys gave this sounds like a good thing. Reward you with lower rates for lower claims. But it doesn't sound like you agree?
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Old 12-04-2004, 04:31 PM   #31
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Re: Sub Contracts


I think the EMR is a good thing.
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Old 12-05-2004, 01:56 AM   #32
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Re: Sub Contracts


I think it's a good thing too..
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Old 12-05-2004, 11:25 AM   #33
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Re: Sub Contracts


Quote:
Originally Posted by Mike Finley
it doesn't sound like you agree?
It's defiinetly good that the EMR asffords us some control over the premiums we pay - particularly as it not only serves to reward us for working "safe" but also as it serves to raise the premiums for those who don't.
My 'attitude' is about the ability of the insurance company to more or less fix the base premiums industry wide. Maybe my negative outlook on that aspect of insurance demands some re-examination. On principal though, I just hate the idea of any vendor enjoying an advantage that I don't. I should probably just go ahead and get over it.
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Old 12-05-2004, 12:44 PM   #34
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Re: Sub Contracts


Insurance companies have been put in a rough spot during the last 4 years. Facing the new mold issues just about destroyed Texas, 9-11 blew up the re-insurance industry, the hurricanes in florida, and the sky rocketing costs of homeowner lawsuits against builders, developers and unscrupulous contractors has causes the insurance industry to be turned on its ear and we unfortunately are getting the worst of it.

Don't get me wrong, I'm not happy about the outreagous insurance situations we are all facing one bit, but I like to know what is causing my pains instead of just complaining and blaming it all on corporate greed.

EMR sounds like a step in the right direction to me. Anytime I can be rewarded as an individual instead of taking lumps because of paying rates based on the worst individuals in an industry, I'm all for that.

I hear that there is talk the insurance industry is possibly going to turn the corner on the whole paper contractor sub ration here pretty soon and ease up on that part of the problem.
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Old 01-15-2005, 05:07 AM   #35
 
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Re: Sub Contracts


Subcontactors are for your benefit. You hire them to preform a function until the project is competed.

All correspondence, talks about changes, changes, are your responsibility until the project is completed. After that its all free for someone to do other work.

You control payment. You control the project. You control the subcontractors. If you allow this you lost control.

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