Small Risk versus Large Risks in Workmen's Compensation Insurance

In the last decade a new element was introduced into the Workmen's Compensation rating structure and the Manual of rates for a large majority of states shows for each classification so-called "loss and expense constants." For a long time the carriers realized that a small risk presents aspects as regards the cost of insurance differing from those characterizing a risk of a substantial size. The fundamental reason for this condition may be readily recognized if one considers that the small risk does not have the same incentive to provide for efficient and extensive accident prevention work, first, because such work requires an expenditure of money and second, because it does not reduce the cost of insurance. Furthermore, it must be borne in mind that many small employers do not keep accurate and adequate payroll records and, in certain industries, are tempted to conceal and do conceal considerable portions of the payrolls actually expended