CPS Risk Assessment & Underwriting 2

Question 1

A company misclassifies a roofer as a clerical worker for workers' compensation purposes. What is the primary financial risk?

Accepted Answer

Significant additional premium charges at policy audit

Answer

Misclassifying high-risk workers as lower-rated classes results in substantial back-premium charges when the insurer audits payroll at policy year end.

Question 2

Which factor most directly affects a company's Experience Modification Rate (EMR) for workers' compensation?

Accepted Answer

Actual claims history compared to expected losses

Answer

The EMR compares a company's actual loss experience to the expected losses for its industry, rewarding or penalizing based on claims history.

Question 3

An underwriter is reviewing a contractor's payroll submission for workers' comp. Which payroll element is typically EXCLUDED from the premium calculation?

Accepted Answer

Overtime premium (the extra half-time portion)

Answer

Most states allow exclusion of the overtime premium (the extra 50% portion above straight-time) from workers' comp payroll, reducing the premium base.

Question 4

Under the NCCI payroll cap rule, what is the maximum weekly payroll per employee used to calculate workers' compensation premiums for executive officers?

Accepted Answer

A state-specific maximum set by statute

Answer

NCCI and individual states establish minimum and maximum payroll caps for executive officers that vary by state and are updated periodically.

Question 5

When a staffing agency places workers at a client site, workers' compensation coverage responsibility generally falls on:

Accepted Answer

The staffing agency, as the employer of record

Answer

Staffing agencies, as the employer of record for placed workers, typically carry the workers' compensation policy and include those workers in their auditable payroll.

(CPS) Certified Payroll Specialist Practice Test

(CPS) Certified Payroll Specialist Practice Test

CPS Risk Assessment & Underwriting 2