Most organizations purchase workmen compensation insurance as an annual contract. However, the number of workers in any organisation could keep changing throughout the year. Thus, any or both of the following two situations may occur at the time of a claim:
- Number of workers employed by the insured is different from what was provided at the time of contract
- Average pay of the workers is different from what was provided in the contract
The “all employees covered” clause implies that even if the number of employees is more than the registered employees/workers in the insurance plan, the insurer will assume that all the employees are covered under the workmen compensation insurance plan.
In the case of an average pay difference, insurer will prorate the WC coverage. The policy provider will extend coverage to all employees/worker.
Hence, pro-rating process may increase the employer’s liability at the time of the claim if the average pay or number of workers is more than what was stated in the insurance proposal.
Case Study: 1
From the last five years, K.S Clothing Mills had carved a niche for itself in the industry. As the nature of the business involved working with machines, the company bought a workmen compensation insurance policy at the time of inception. During its inception, the company had just 100 employees. However, the headcount reached 500 in 2019. In the same year, one of its employees, Rajesh Singh, met with an accident while working at the mill. His leg got caught while working in the machine, and he suffered major injuries. Doctors had to amputate a part of his leg to save his life. As Rajesh was the breadwinner of the family, their future seemed bleak.
How WC Policy Compensation helped?
However the worker compensation insurance policy purchased by K.S Clothing Mill came to his rescue even though he was a new joiner. The company had not informed the insurer about his joining. Nevertheless, as part of the policy, the insurer paid the compensation.
Upon receiving the claim intimation, the workers’ compensation insurer asked for various documents like duly filled claim form, doctor’s prescription, medical bills, etc. Here the insurer offered the following two coverage:
- Medical Expenses Cover: As Rajesh was treated in the hospital, the insurer settled the medical expenses incurred on his treatment.
- Disability Cover: Due to the accident, Rajesh lost his leg and was disabled. Here, the insurer offered him disability benefits to cover the loss of income.
The insurer also covered transportation expenses incurred on taking Rajesh to the hospital.
Despite the fact that Rajesh had joined the company only a few months prior to the accident and K.S Clothing Mill had not informed the worker compensation insurance company about his joining, the insurer offered the coverage.
Case Study: 2
LKML Lighting had a flourishing business of manufacturing lamps. The company bought a workmen compensation insurance policy to cover legal liability coverage in case of death or accidents suffered by workers during working hours.
At the time of buying the insurance policy, the company had 30 employees which increased to 300 by 2018. With the increased number of employees there was an increase in the average salary as well.
In 2019, one of its employees – Manoj Rai slipped on the factory floor and broke his left arm. He suffered a fracture. The employer was liable to pay compensation to the injured employee as the accident took place in the factory, and there was no fault of Manoj.
The company bought the workmen compensation insurance policy much before 2019. There was a hike in worker’s income during intervening years , but insurance company was unaware of it. Despite that the insurer agreed to settle the claim. The worker’s compensation insurance company paid compensation which was computed on the basis of the current salary of Manoj.