How can workers' compensation claims affect an employer's insurance costs?

When an employer experiences workers' compensation claims, it often leads to an increase in insurance premiums based on the employer's claims history. Insurance companies assess the risk associated with providing coverage to a specific employer, and a history of frequent or high-cost claims indicates a higher risk. As a result, insurance providers may increase premiums to offset the potential costs of future claims. This is a fundamental aspect of how insurance underwriting works, as premiums are directly related to the risk profile of the insured party.

In contrast, options suggesting that claims might lead to lower premiums or have no effect at all do not align with typical insurance industry practices. Additionally, while immediate payouts to employees occur as part of the claims process, this does not influence the employer's ongoing insurance costs or premiums in the same way that the history and frequency of claims do.