Reforms in state Workers Compensation laws, together with improvements in workplace safety, are driving down Workers Comp rates — a trend that, ironically, could lead to more workplace accidents — and, thus, higher premiums. Warns Institute of Workers Comp Professionals co-founder Frank Pennachio, “Declining rates act as blinders for many employers. With lower prices, it’s easy to shift focus away from injury management and cost-containment to other, more pressing business.”
Pennachio points out that every business has its own Comp experience modification rating (“mod”): a discount from, or a premium added to, the average rate paid by other businesses in its class. Because your mod is based on the cost record of your business, the more effective your workplace safety program, the greater your discount, and the lower your rates. To keep your mod (and, thus, your rates) under control, we’d recommend these guidelines for keeping tabs on claims:
- Go beyond comp rates to use a “big picture” approach that focuses on the total cost of workplace accidents by including such factors as lessened productivity, overtime, and decreased customer service and satisfaction.
- Make sure that every job in your businesses is categorized accurately by hiring an independent auditor, rather than relying on the insurance company’s audit. If you’re a contractor, for example, the clerical person who manages your truck repair schedule is obviously at a much lower risk for an on-the-job accident than a roofer would be: giving them the same rating just because they both work for you will drive up your premium.
- Because a history of small, recurring claims can have a greater impact than one large one, pay special attention to repeat accidents, which insurance companies see as a warning sign of a recurring problem.
- Look into state-run safety programs, such as a drug-free workplace program, that might offer Comp rate discounts.
- Consider state-authorized industry groups that pool their risks to enjoy lower ratings.
Last, but not least, don’t view Workers Comp as a price-driven commodity. Our risk management professionals work with leading insurers to ensure that you benefit from the product best suited to your needs. We’d be happy to offer recommendations on improving your mod — the most effective way of driving down your costs in the long run. Just give us a call.
