6 Tips to Reduce your Cannabis Workers’ Comp Insurance Costs

a cannabis business owner saving money for workers comp
Mordechai Kamenetsky
Last Updated: 
July 1, 2024

Managing workers' compensation insurance can be challenging for cannabis businesses in a rapidly evolving industry. In this article, we’ll cover six strategies to help you reduce your workers’ comp costs. 

Some methods, like correctly classifying employees and creating a written safety program, are easy to implement. Others, such as lowering your Experience Modification Rate (ExMod), take more time but can save you a lot of money in the long run.

Table of Contents

#1 - Classify your Employees Correctly

The National Council on Compensation Insurance (NCCI) provides a classification system to help you identify the correct workers' compensation insurance for your business. Insurance companies use these classifications to set the workers’ comp rates for your cannabis business

Using the right class code for your employees can save you a lot of money on cannabis workers' comp insurance

Here are some ways: 

Class Code 8017

In most states, the preferred class code for dispensaries is 8045. However, some states may not have a specific distinction for cannabis operations, allowing you to use the regular retail class code 8017. 

Always check if your state permits the use of 8017, as it might offer potential savings.

Office Staff

For office personnel handling tasks such as scheduling, billing, and intake, use class code 8810. This clerical code is significantly cheaper than the operational role codes and can help reduce your overall premiums.

Exclusions for Owners

As an owner, you might not need to include yourself in the coverage. Excluding yourself can result in significant savings, especially if you are involved in cultivation, which uses the higher-rated class code 0035.

For more detailed information, check out our cannabis class code guide

#2 - Establish a Written Safety Program

Developing a written safety program is a straightforward step that can often lead to immediate discounts from your insurance provider. 

Here are important elements to include in your safety program:

Proper use of Heavy Equipment

Train employees on the correct operation of heavy machinery used in harvesting and cultivation. Regularly inspect and maintain equipment to prevent malfunctions and accidents.

High-Intensity Lighting Safety

Provide protective eyewear to workers exposed to high-intensity lighting used in grow rooms. Educate staff on the proper handling and positioning of lighting equipment to avoid burns and eye damage.

Chemical Safety 

Implement a comprehensive chemical safety training program. Provide personal protective equipment (PPE) such as gloves, masks, and protective clothing. Store chemicals in clearly labeled, secure containers and areas.

Ergonomics and Safe Lifting Practices

Train employees on proper lifting techniques to prevent back injuries. Encourage the use of mechanical aids or team lifting for heavy objects. 

Design workstations to minimize repetitive strain injuries, particularly for tasks like trimming plants.

Preventing Falls

Ensure that walkways and work areas are clear of obstructions and spills. Use non-slip mats and footwear to reduce the risk of slips and falls. Provide proper training on the use of ladders and step stools.

Fire and Explosion Prevention in Production Areas

Implement strict safety protocols for the handling and storage of flammable chemicals used in extraction processes. 

Install and maintain fire suppression systems in production areas. Train employees on emergency procedures and the proper use of fire extinguishers.

Air Quality and Ventilation

Ensure adequate ventilation in all work areas to prevent the buildup of harmful fumes. 

Use air filtration systems to maintain air quality and reduce exposure to airborne contaminants. Monitor air quality regularly and take corrective action if needed.

Documentation and Oversight

Remember, it's crucial to document your safety program thoroughly and appoint a responsible person to oversee it; otherwise, it might not qualify for a discount.

#3 - Implement a Return-to-Work Program

Introducing a return-to-work program for your cannabis employees can help lower your workers' compensation costs. 

When employees come back to work sooner in lighter-duty roles, it saves money on lost wages. This reduces the overall cost of each claim, which can help keep your insurance rates from increasing. 

Additionally, having a return-to-work program shows the insurance company that you are actively managing workplace injuries, which can lead to better premium rates over time. 

#4 - Formalize your Drug and Alcohol Free Workplace Policy

Having a formal, written drug and alcohol-free workplace policy can help you save money on workers' compensation insurance for your cannabis business.

Having a clear, written policy reduces the risk of workplace accidents caused by impairment, which can lower the number of claims and your overall insurance premiums. 

Many insurance companies offer discounts to businesses with such policies in place, as it demonstrates a commitment to maintaining a safe and productive work environment.

To maximize savings, include the following elements in your policy:

  • Clear Prohibitions: No drug or alcohol use during work hours or on company property
  • Testing Procedures: Include pre-employment, random, and post-incident testing
  • Support Programs: Provide access to counseling or rehab services
  • Consequences: Clearly outline disciplinary actions for violations
  • Acknowledgment: Have employees sign a form acknowledging the policy

Documenting and regularly updating your policy, along with training your staff on its importance, will help ensure its effectiveness and can lead to lower insurance rates.

#5 - Lower your ExMod

Lowering your ExMod is another effective strategy to save money on your workers' compensation insurance.

Understanding ExMod

An Experience Modification Rate (ExMod) reflects your company's safety record compared to others in your industry. Only companies that have been in business for a few years will have an ExMod.

An ExMod above 1.0 can increase your premiums, while an ExMod below 1.0 indicates better-than-average performance, leading to lower premiums.

Strategies to Reduce your ExMod

  • Reduce Claims: Focus on minimizing the number and severity of workers' compensation claims. This can be achieved through comprehensive safety programs and effective return-to-work strategies.
  • Safety Programs: Implementing formal safety programs can prevent accidents and injuries, directly impacting your ExMod by lowering the number of claims.
  • Return-to-Work Programs: These programs help injured employees return to work in modified roles, reducing the costs associated with lost wages and medical expenses.
kickstand note
Kickstand Note:

Improving your ExMod requires a long-term commitment. While immediate results may not be visible, consistently applying these strategies will gradually lower your ExMod.

Remember, changes in your ExMod are based on a rolling three-year period, excluding the most recent policy year.

For a comprehensive overview on managing workers' comp for your cannabis business, check out our guide to cannabis workers’ comp.

#6 - Ask for Credits 

Credits are discounts that insurance companies can add to your policy. They might do this to match a competitor's offer, recognize your great safety record, or simply to keep your business. 

But, insurance companies usually don't offer these credits unless you ask, so make sure to inquire about them when getting your quote.

Here are some types of credits you might qualify for:

Safety Program Credits 

As mentioned earlier, if you have a strong safety program, it shows insurers you're serious about preventing accidents. This can help you get credits and lower your premiums.

Drug-Free Workplace Credits 

Having a formal drug and alcohol-free policy can make your workplace safer. Insurance companies often give credits to businesses with such policies because they reduce the risk of accidents.

Claims-Free Discounts 

 If you have a good safety record with no or hardly any workers' compensation claims, you might qualify for claims-free discounts, which can lower your insurance costs.

Business Attraction Credits 

Sometimes, insurance companies offer credits just to win or keep your business, especially if you're shopping around for the best rates.

How to Qualify for Credits

  • Ask Directly: When discussing your policy with your insurance provider, ask about any credits your business might be eligible for. Don't hesitate to ask if there are ways to reduce your premiums.
  • Provide Evidence: Be ready to show proof of any safety programs, drug-free policies, or other initiatives you have in place. This can help your insurer justify the credits.
  • Review Regularly: Regularly check your policy and the credits you are getting. As your business improves its safety measures, you might qualify for more credits.

Get a Customized Policy to Save on Workers' Comp

Need help figuring out which cost-saving strategies apply to your cannabis business workers’ comp? Our experts are here to guide you through identifying and implementing these strategies. Save money and ensure your cannabis business has the best coverage. 

Contact us for a tailored workers' compensation policy that fits your unique needs. Don’t miss out on the opportunity to lower your insurance expenses. Get an instant quote today and see how much you can save!

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Note: The information provided in this blog is intended for general informational purposes only and is not a substitute for professional legal or insurance advice. Laws and regulations regarding workers' compensation insurance are complex and vary by state and by specific circumstances. Therefore, readers are encouraged to consult with a qualified legal or insurance professional to obtain advice with respect to any particular issue or problem they might have.

Mordechai Kamenetsky

Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.

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