The premium (tariff) is governed by the type of cover selected by the proposer as decided by the insurance regulator in India IRDA.
Following two types of covers are available under Workmen (now Employees) Compensation Insurance:
- Table A: Indemnity against legal liability for accident to employees under
- Workmen’s Compensation Act 1993
- Fatal Accident Act 1855
- Common Law
- Table B: Indemnity against legal liability
- Fatal Accident Act 1855
- Common Law
The policies in the first case (Table A) can be extended to cover the contractual workers as well. However, the premium is further dependent on various factors, such as:
- The nature of business,
- The number of employee base,
- The location of the workers,
- Whether occupational disease is covered
- The wages before deductions of the workers (including lodging expense if provided by employer), and
- Term of the Policy (12 months or more)
- Minimum premium in case of household servants is Rs. 10 in any other case it must be Rs. 20.
- If the insured covers multiple types of risks (workers in electrical and workers in mechanical department) under one policy, the minimum premium should be Rs. 30
- The occupational tariff rates are provided time to time by Insurance Information Bureau of India (IIB) which can be referred to for the details of premium estimates for each type of work, business, occupation of the workers/employers in consideration. This is also called “Book Rate”.
- Maximum amount of wage to be considered while calculation is Rs. 12,000 p.m. and for the additional wage the premium should be estimated based on 6.25% of the book rate for the occupation, subject to following minimum limits:
- 2 per mille (thousand) per annum for workers engaged in manual labour
- 1.2 per mille (thousand) per annum for clerical staff not engaged in manual labour
- Medical expense (if covered) limit including cost of ambulance increases the premium in the following manner:
Expense per case! (Rs.)
|Premium Increase over Book Rate|
! Payable by the insurance policy
- Occupational diseases are covered at an additional premium of 50% of the book rate
- The premium calculated in this manner is per case and should be multiplied with number of employees or workers to be covered to arrive at final premium.
- If the average wage of the employee exceeds Rs. 50,000 per annum special tariff rates (lower than normal book rate) may apply.
Case on Workmen Compensation Policy Premium
Shoumik Das is working with an insurance advisor to work out the minimum premium for worker’s compensation policy for his firm. Shoumik is a civil contractor and employs about 70 workers and supervisors at any time for the work.
Since the wages of these workers vary throughout the year, his advisor Chaitali asks him to estimate an average compensation for the past year (12 months) to understand the average liability of insurer in case of a claim.
The average age of his employees is 37 years. Shoumik has not faced any major accident involving his workers or machinery due to stringent security processes implemented by him.
Shoumik has selected the insurance cover under Table A for his workers, and furnishes the following information (all numbers are daily average for past 12 months):
- Employees engaged in loading and unloading vessels: 15 (Avg. wages past 12 months: Rs. 75,000)
- Workers engaged in Building towers and buildings: 35 (Avg. wages past 12 months: Rs. 75,000)
- Woodworker/carpenters engaged: 10 (Avg. wages past 12 months: Rs. 80,000)
- Agriculturists (botanists or gardeners): 4 (Avg. wages past 12 months: Rs. 60,000)
- Other employees: 6 (Avg. wages past 12 months: Rs. 100,000)
The premium quoted by the insurer to cover Shoumik’s staff for 12 months is Rs. 48,595 and Rs. 66,780 under Table A. First option does not cover occupational diseases and sub-contractors.
Shoumik has the option to exclude (or reduce) medical expenses (currently included at Rs. 20,000 p.a.) under the policy which will decrease the premium accordingly.
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