Tame the Beast that is Workers’ compensation!

Workers' Compensation gets a lot of attention

Of all the commercial insurance programs out there, none get more attention than workers’ compensation.? Workers’ comp is one of those insurance programs that costs a lot to some, may be riddled with hints of fraud, and is required by most states to be purchased.? When challenged with costly claims and high losses, company leaders oftentimes feel like there is nothing they can do to tame the beast.? In this article, I will provide a list of considerations that, if applied, will not only tame the beast, but will reduce its size as well.

It's all about the numbers

Workers’ compensation is based on two simple factors, the rate applied to a job classification (SIC code) and the payroll associated with it.? Sounds easy, right?? Well, not so fast.? Other factors can and do have an influence on its cost.? These factors include:

Underwriting credits and debits

Underwriters have the ability to charge more or less for premiums based on their interpretations of your company's risks.? These decisions to increase or decrease premiums may be based on regional pricing models, appropriate marketing awareness as to what your company does and how it does it, insurance company appetites, and performance metrics such as revenue levels and losses.

Tame the beast

Engage in underwriter conference calls, identifying where problem areas can be improved, and actively engaging in safety practices to reduce injuries and promote a safer workplace.? If you have a robust safety and health program, spell it out.? Make it a point to highlight all of your safety efforts and welcome loss control visits by your insurance company.? The better the impression, the better the underwriting terms and associated premiums.? Make sure your underwriter knows about your company for all it is doing to promote safety, and plan to meet them when available to personally detail your interests in making your company safer.

Experience Modification Factor: Do you know your company's mod?

The experience modification factor is determined based on historical loss data, taking into consideration both the frequency of claims and their costs.? The factor is based on a value of 1.0. If your company has a favorable loss record, your mod value may be lower than 1.0, such as .87, for instance. This would translate into a 13% savings from the standard 1.0 factor (1.0 - .87 = 13%)

Tame the beast

Know what is in your experience modification calculation and verify the results.? Have your current insurance agent or broker perform a mod analysis using Mod Master.? They will know what this program is and should welcome the opportunity to check it out for you.? The data entered may be wrong, and the entire factor could be way off.? Also, ask about how your state’s modification works.? Some states will have losses reported differently than others, resulting in poor claims management awareness.? In short, the sooner someone comes back to work, the better.? Keep losses low and costs lower.? This is the most direct way to positively impact your experience modification factor.

Drug-Free Workplace Credit

Drug Free Workplace Certification: States offer a variety of discounts if your company has a certified drug free workplace program.? Savings can range from 5% to 7.5% based on the state allowance.

Tame the Beast

If you have a drug free workplace, make sure you are getting the credit you deserve from your insurance company.? They offer credits based on a percentage of the premium, which could result in saving thousands of dollars.? If your company is not a certified drug free workplace, then it should be.? Drug use across the country is reaching record highs, pardon the pun, resulting in placement of workers that are prone to use to seek out those companies not checking for it.?

Claims Management and Loss Control

Claims and losses drive all workers’ compensation programs and their costs.? Being aware of each could save hundreds of man hours and thousands of dollars, if not more.? When it comes to claims and the methods of controlling losses, the following are most important:

Tame the Beast

Reporting claims in a timely fashion: claims should be reported within 24 hours every single time.? No excuses.? If your team is not reporting losses immediately, then there is a systemic issue that must be handled.? Claims that are reported late run significantly higher than those reported promptly.?

Claims management: ensuring that each claim is reported is one thing.? Another is what to do after a claim occurs.? Claims management should include the following key elements:? standard reporting procedures, central processing of claims within a company, an early return-to-work program, medical management, supervisory accountability, and active employee engagement after a loss occurs.

Loss Control: When the insurance company calls to schedule a loss control visit, welcome them with open arms.? They are there to help.? Gain a higher level of comfort by inviting your agent out to accompany the walk through.? They will better appreciate the safety efforts in place and will be in a better position to articulate the work your company is performing to reduce the likelihood of injury as a result.

Reply to loss control reports: When you receive a report from the loss control consultant with suggestions and recommendations, make it a point to reply to the letter promptly.? In the event the suggestion is costly, address it directly to the loss control professional.? Ask for a viable alternative to the original recommendation, while still being interested in improving the safety of the workplace.? This mutual appreciation for the work will go a long way and will likely spawn a much more productive relationship.

Conclusion

Taming the beast of workers’ compensation will certainly take more than this article affords, but each point does have its merits.? Be sure to engage your entire team in the efforts of safety and claims management.? Establish a safety committee and consider performing self-audits for safety and health.? Being more aware is always a good thing when you are trying to tame anything.

About the author

Brian Smith is a commercial insurance professional with the Insurance Office of America, based out of Atlanta, GA. As a former U.S. Army captain, he specializes in working with veteran-owned companies and government contractor risks, as well as complex insurance placements. Email/phone [email protected] or 404-918-4775. www.riskreconnaissance.com