Written By Eric Schirding
Worker’s Compensation Insurance is something almost every business owner has to deal with, though few would say they enjoy it. The process should be straightforward: you pay premiums to cover replacement wages and medical treatment if an employee is injured during the course of employment.
You might think there’s nothing else to do but pay your bills and encourage your team to work as safely as possible. But, if left on autopilot, Worker’s Compensation claims costs can quickly skyrocket out of control, taking your premium costs along with them.
If you’re purchasing Worker’s Compensation Insurance directly from a carrier, they have little incentive to help you control your costs and will probably only provide enough oversight to make sure their own bottom line isn’t being negatively impacted. Even if you work with an independent agent or insurance broker, their role is still oftentimes relegated to simply selling and renewing your policy. Not every agent has the time and expertise to perform rigorous oversight.
That’s where a Risk Management professional comes in. If you’re reading this because you are worried about rising Worker’s Compensation Insurance costs, here are five things you (or your Risk Manager) can do to help.
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Reduce your Worker’s Compensation costs by lowering your reserves
Your reserves are the amount of money you have set aside to cover your Worker’s Compensation claims. They also play a large role in your renewal prices each year because they are judged as a factor in your total annual claim payout amounts. In many cases, companies are being penalized unnecessarily with higher renewals simply because their reserves are higher than they should be.
For example, if the reserve is set to $100,000 for a recently filed claim and you have already paid out $25,000, it’s possible that you no longer need $100,000 in reserves. However, the insurance adjuster has no motivation to keep up with this and lower your reserves accordingly. As the claim nears its end, you may have only paid out $50,000 but, if your reserve is still $100,000, that claim will be judged based on the cost you paid plus the reserve. That makes it look like the claim was three times costlier than it really was!
With the oversight of a Risk Manager, your reserves can be adjusted for accuracy as the claim continues. A Risk Manager stays on top of the claim status and takes on the task of working with the adjustor to lower the reserve when it becomes clear that the original amount is no longer needed. With this practice in place, the cost of your claims on which your renewal is based will be far more accurate and not inflated by superfluous reserves.
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Reduce your Worker’s Compensation costs by uncovering hidden injury causes
When an employee reports an on-the-job injury, how diligently do you go looking for other potential causes of that injury? Unfortunately, workers sometimes do incur injuries outside of work and then roll those injuries into a new or existing Worker’s Compensation claim.
The intention may not always be malicious. For example, an employee may have been subject to repetitive motion at a prior job, which contributed dramatically to an injury that was finally triggered by one wrong move at your business. Without any oversight, your company may be left paying for additional medication, rehab, and time away from work that are not entirely due to injuries sustained while employed by you.
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Reduce your Worker’s Compensation costs by eliminating claims without merit
“Monday morning claims” exist precisely because some employees get injured over the weekend and then try to claim a work accident on Monday in order to receive time off and paid treatment. Alternately, an accident can be fabricated or grossly exaggerated into requiring Worker’s Compensation when no harm has actually occurred.
This goes beyond a legitimate claim being inflated due to outside-of-work activities and moves into the realm of insurance fraud. A Risk Manager providing oversight on your claims can advocate on your behalf for the insurance company to hire a private investigator and determine whether the claim is valid, and to what extent.
If you uncover evidence that an employee is either completely making up his or her injury, or greatly exaggerating it, the entire claim may have grounds for denial. Obviously, eliminating meritless claims is a great way to reduce your total costs and keep your premiums from increasing.
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Reduce your Worker’s Compensation costs by using an independent loss consultant
Sometimes, you know your business so well that it becomes easy to overlook safety concerns without even realizing it. An independent loss consultant is trained for precisely that. When a consultant walks through your factory or warehouse, he or she can identify areas of risk and potential safety violations. This report is for your eyes only, so you don’t have to worry about being penalized for the findings. Rather, you get all the information you need to fix the problems before a surprise visit from OSHA.
Not only can a loss consultant point out glaring violations and safety hazards, but they can also make more sophisticated recommendations based on years of expertise and knowledge of what the safest outfits do that you are not currently doing.
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Reduce your Worker’s Compensation costs by keeping your safety documentation on hand
Speaking of surprise visits from OSHA… Getting caught without proper safety documentation is a completely preventable offense. But having these items up to date and on hand is about more than just avoiding a fine. We know from experience that companies who keep good records and documentation tend to be more safety-minded (and thus, safer) overall.
Do you keep copies of every safety meeting sign-in sheet, along with the topics covered? Do you keep your OSHA 300 Log updated with every incident? Do you have safety data sheets available and visible to employees who handle hazardous substances? These are just a few of the documents needed to stay in compliance and stay safe. A Risk Manager will guide you to ensure you have what you need for your specific industry and type of operation.
One more benefit of engaging the services of a Risk Manager is their ability to negotiate penalties on your behalf if you are ever found in violation by OSHA.
As you can see, the goals of oversight are twofold: reduce the chances of a claim and contain costs when claims happen. By working with a Risk Manager, particularly one who specializes in your industry, you can rest assured that your business has the right coverages, is being proactive about safety, and will have a true ally by your side to contain costs when claims occur.
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