Workers’ Compensation – Two Types of Dividends

There are two different kinds of dividends in the marketplace today. One of them is a sliding scale and the other one is flat. The flat dividend is not a good deal unless you plan on having a terrible year, and if that’s the case, you’re probably only going to get it once.

Flat Dividends

Here’s the deal. A flat dividend says, “Regardless of your loss performance, this is the percentage we’re going to give you back.” Now think about it, from a carrier’s perspective. Are they going to buy the farm on a flat dividend? No, they’re not. They’re going to bet you’re going to take it, and then they’re going to have to pay you less than what they would if you were willing to put a little skin in the game and take a sliding scale.

Sliding Scale Dividends

A sliding scale dividend is a dividend that changes based on the amount of losses that you have. A “slider” starts with a desirable top side offer at a 0% loss ratio, and then it stairsteps about every 5% or so.H  owever, if you have good loss history, the point of inflection that I typically see is at about a 15 to 20% loss ratio. Once you get above 15 to 20%, a flat dividend is probably going to be a better option for you if it’s in that 20% range, but if your loss ratio is zero or five or 10% you’re probably leaving 10, 15, 20 points of dividend on the table by not taking a little bit of risk.

Believe in Your Processes

I have to question a company that’s not willing to put belief in their processes and procedures. Now granted, everybody has a shock loss now and again. Still, my advice to you is to calculate the difference between the two dividends and then decide which one’s going to be best for you based on your historical performance.  If you don’t understand how to do this, it’s okay. I don’t expect a lot of business owners and decision-makers to know this stuff. It’s kind of what we get paid to do.

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David Carothers

 Commercical Insuramce

Kyle Houck

Kyle Houck

 Commercial Insurance


Grayson Carothers

 Personal Insurance

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