The jury is still out as to whether workers’ compensation premiums are tightening. Our latest experience indicates that the carriers are talking a big game about “ditching” unprofitable business but the underwriters can still get pretty creative for a piece of business they really want. We have seen some tightening in auto, general liability and property in some areas, and expect that to continue, but workers’ compensation remains very competitive.
There are many reasons for the soft market, among them legislative moves by many states to control costs and mandate managed care, and the realization of many employers that there are a lot of things they can do to reduce workers’ compensation costs. The following is a brief synopsis of some steps you can take, aside from the obvious safety procedures, to lower your costs. REMEMBER: Call on the expertise and assistance of your entire team – your employees, your broker, carrier, claims administrator and your consultant – to help you.
TRACK YOUR LOSSES — If you do not know where your losses are coming from and what types of accidents are most frequent and/or most severe, you cannot implement the proper plan to prevent recurrence and lessen severity.
REPORT ACCIDENTS IMMEDIATELY — Studies show that the faster a claim is reported, the less likely it will go into litigation. Most claimants hire an attorney because they do not understand the system and believe they are at a disadvantage. The earlier a claim is reported, the sooner someone can contact the claimant, explain what they expect and institute a plan to return that employee to gainful employment as soon as practical.
IMPLEMENT AN AGGRESSIVE LIGHT DUTY/RETURN TO WORK PROGRAM — Returning an injured employee to work on a modified duty basis probably does as much or more to reduce your costs than anything else.
PROVIDER NETWORKS — It is just as important to develop and monitor provider relationships for workers’ compensation as it is for non-work related accidents or illness. The physicians and facilities you choose must understand the workers’ compensation. In particular, it is important that they understand and properly apply the permanent partial disability rating system in the state(s) in which they operate. They must also be an advocate of both the employee and the employer – a team member whose goal is to achieve maximum results from the medical treatment and to return the employees to duty that is safe for him or her as soon as possible.
EDUCATE YOURSELF — Develop at least a basic understanding of rating procedures, the process of experience rating, and the various financing plans (guaranteed cost, self insurance, retrospective rating, high deductible plans, etc.) available in the marketplace. Understand the payroll reporting procedures that allow you to limit executive payroll and do not require you to submit overtime premium. Review your payroll audit when you receive it and question anything you do not understand. Advise your payroll department to instruct the auditor that you want a copy of the audit worksheets so you can catch inaccuracies before the audit is issued.
SETTLEMENTS – CONSIDER ALL COSTS — When deciding whether to offer or accept settlement on a particular claim, keep in mind that there are other costs to a claim than just medical provider bills and salary replacement. For instance if you retain some of your workers’ compensation losses through a high deductible or self insured retention, reserves must be accrued as a liability but cannot be deducted for tax purposes until they are actually paid – a “carrying” cost of every claim.
MONITOR CLAIMS — Even if you are on a guaranteed cost program, is it important that someone in your organization know what claims are open and what is being done to close them. We recommend at least an annual review of large claims. You do not have to listen passively to the claims adjuster’s analysis of a claim. Do not hesitate to ask questions and suggest alternative courses of action.
Jeannine Bailes: Originally from Concord, NC, now Vice President and Manager of the Atlanta Risk Management Department of McNeary Insurance Consulting, a risk management consulting firm based in Charlotte, NC. Ms. Bailes has twelve years of experience in the Risk Management Consulting field, and holds designations of Certified Insurance Counselor (CIC) and Associate in Risk Management (ARM). She is a graduate of both the PMD program at Kenan Flagler Business School – UNC-CH and the Presbyterian Hospital School of Surgical Technology, with five years experience in evaluating and negotiating workers’ compensation claims. McNeary Insurance Consulting does not sell insurance and has helped their clients make good insurance purchasing and risk evaluation decisions for over 40 years. Ms. Bailes may be reached at: BailesJ@mcneary.com.