ASP Workers' Compensation and Risk Finance

Question 1

An employer's Experience Modification Rate (EMR) is currently 1.35. What does this indicate about the employer's workers' compensation costs compared to the industry average?

Accepted Answer

Their actual losses are 35% higher than the industry average, resulting in higher premiums

Answer

Their actual losses are 35% lower than the industry average, resulting in lower premiums

Answer

They have 35 more incidents than average, but premiums are unchanged

Answer

Their EMR will automatically reset to 1.0 after one year without a claim

Question 2

According to H.W. Heinrich's accident cost iceberg model, which category represents the largest proportion of total accident costs?

Accepted Answer

Indirect (uninsured) costs such as lost productivity, investigation time, and administrative expenses

Answer

Direct costs such as workers' compensation insurance premiums

Answer

Medical costs paid directly to healthcare providers

Answer

OSHA fines and legal penalties

Question 3

A company's safety investment of $50,000 prevented an estimated $300,000 in accident costs. What is the Return on Investment (ROI) for this safety program?

Accepted Answer

500%

Answer

600%

Answer

83%

Answer

17%

Question 4

Under most U.S. state workers' compensation systems, which of the following injuries would typically be classified as a compensable 'occupational disease' rather than a traumatic injury?

Accepted Answer

Hearing loss developed over years of exposure to high noise levels without a single identifiable incident

Answer

A broken arm resulting from a fall from a ladder

Answer

A laceration from a machine guard failure

Answer

A burn from accidental chemical splash

Question 5

Which method of risk financing transfers the financial risk of workplace injuries to a third-party insurer while the employer pays a fixed premium?

Accepted Answer

Commercial (guaranteed cost) insurance

Answer

Self-insurance

Answer

Captive insurance program

Answer

Retrospective rating plan

Question 6

A retrospective rating plan for workers' compensation differs from a guaranteed-cost policy primarily because:

Accepted Answer

The final premium is adjusted at policy end based on the employer's actual loss experience during the period

Answer

It eliminates the need for an experience modification rate (EMR)

Answer

Premiums are paid monthly instead of annually

Answer

Coverage is provided by a government fund rather than a private insurer