How is the size of a sliding-scale dividend calculated for workers compensation insurance?

The size of a sliding-scale dividend for workers' compensation insurance is calculated based on the insured's claim record. This approach means that the dividend awarded can fluctuate depending on the number and severity of claims made by the policyholder. A favorable claim record—characterized by fewer claims or lower claim costs—may lead to larger dividends, while a poor claim record can result in smaller dividends or no dividends at all.

This method encourages policyholders to improve workplace safety and reduce claims, as their potential for dividends increases with fewer claims. The sliding-scale model is designed to reward responsible risk management and create a direct financial incentive for insured businesses to maintain safety standards and limit claims. Hence, it is intrinsically tied to the insured's performance rather than being a static amount or based solely on industry norms.