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Most employers look at Workers Compensation as just another necessary evil and unavoidable cost of doing business. It’s usually one of those out of sight, out of mind things when rates are low. It’s not until an employer is hit with a rate hike that they really start to give some thought to their Workers Compensation rates.

Employers need to constantly look at Workers Compensation as a tool to improve their business’s bottom line, and they certainly need to make an effort to keep their low rates over the long term so that they can take advantage of some significant savings.

Here are four common mistakes made by employers that frequently deter their Workers Compensation savings:

1. Assuming that lower rates equate to lower costs. Don’t make the faulty assumption that your cost will go down automatically just because your rates have been reduced. Workers Compensation insurers use an experience modification factor to examine the actual losses incurred by the insured company and establish cost. The actual losses are compared with other companies in similar industries. If the insured company’s past losses are below average, then the insurer gives the company a credit rating lowering their premium, but an added surcharge is applied to the premium if the insured company’s past losses are above average.

2. Believing that employers have little control when it comes to the expense of Workers Compensation. Employers know they’ve got to have Workers Compensation insurance. However, this acknowledgment shouldn’t lead to an employer thinking they’ve got to pay excessively for it; employers don’t and shouldn’t. Cost reduction starts at the hiring process. Initiate effective interview techniques and background checks to help ensure the right people are hired for the right jobs. That said, there’s no way to eliminate the possibility of injuries in a workplace completely. Therefore, it’s equally important to have an effective return-to-work program in place to assist injured workers return to work as soon as possible and reduce the cost of their claims.

3. Neglecting or de-emphasizing cost containment and injury management during low rate periods. Safety should be an unyielding focus at all times. This will not only help a company reduce their claim numbers, but also keep their rates low over the long term. Employers need to keep an eye on the issues that frequently impact the costs of claims, such as medical care costs and lost wages. Also, remember that open claims mean escalating costs and negative impacts to the company’s modification factor. Of course, this causes an increased cost for coverage.

4. Not making the association between cost containment and worker retention. Studies have shown that fewer accidents occur among skilled workforces, but even skilled workers can have an accident. A large part of whether or not an injured skilled employee returns to work is based on how their employer responds to them during and after recovery. An important part of an employer’s response will be in having a return-to-work program that includes maintaining constant contact with all injured workers and their health care providers to monitor how they’re recovering and when and how they can get back to work as soon as possible. Skilled employees that are kept in the loop with a return to work program’s periodic phone calls about what workplace changes are occurring in their absence are more likely to return. On the other hand, skilled employees that feel forgotten, undervalued, and disconnected aren’t very likely to return.

There are four types of insurance that most small businesses purchase. The first is Property insurance. This type of coverage provides compensation if business property is damaged, stolen or lost. In addition to covering the physical business structure, property insurance covers personal property. This includes inventory, office furnishings, raw materials, computers, machinery and other items that are part of business operations. Property insurance coverage doesn’t end with protecting physical assets. It also affords operating funds when business owners are forced to take steps to get their business back on track following a major loss. Property insurance might provide coverage for broken equipment in some cases. It can also provide coverage for water damage, debris removal following a fire and several other specific items.

Business Vehicle insurance is the second type of coverage many small businesses purchase. Anyone who uses their own personal vehicle for business purposes should discuss this type of coverage with their agent. Most personal vehicle insurance policies don’t provide coverage if the automobile that is involved in an accident is used mostly for business purposes. Business Auto insurance policies afford coverage for vehicles that are owned and used by a business. Third parties injured by the policyholder’s vehicle receive compensation for damages up to the policy limit amount. Some policies might provide compensation for repair or replacement of vehicles that are damaged from flooding, theft, accidents and similar events.

The third type of coverage most small businesses purchase is Liability insurance. Any business can face a lawsuit at some point in today’s litigious society. For example, a person might claim that a business caused them harm from a service error, defective product or negligence in providing a safe environment. Liability coverage provides compensation for damages a company is liable for. However, the coverage is only provided up to the policy’s limit amounts. These policies usually also provide funds for legal defense expenses, attorneys’ fees, medical bills and several other related expenses.

Workers Compensation is the fourth type of insurance purchased by many small businesses. In nearly every state, employers are required by law to have Workers Compensation coverage if they have employees. This number usually varies from three to five, and even if a business employs fewer than three employees, it is still wise to purchase this coverage. Workers Compensation pays for a portion of lost wages for workers who are injured. In addition to this, it also covers the medical care they require. Coverage is provided to employees who are injured at work regardless of who is at fault. If workers die as a result of the injuries they sustain, the insurance company compensates the surviving family members of the deceased worker.

In addition to the four major types of coverage purchased, there are several other valuable policies some companies might want to purchase. Umbrella policies, Terrorism coverage and specialized liability policies are all helpful. Umbrella policies, much like an umbrella, cover above and beyond the normal inclusions. These are usually obtained to prevent high losses by businesses with high risks. Specialized liability policies are made up of several types of individual coverage. Terrorism coverage provides compensation for damages and medical care to a certain extent in the event of terrorism.

To find out which options are best for your business, be sure to speak with one of our agents.

Business owners know an injury to an employee or severe property damage destroys productivity; so all losses should be avoided or reduced. So why do insurance loss control representatives’ visits and the ensuing safety recommendations bother business owners so frequently? Is it a nuisance? Is it the money to implement loss control strategies? Insurance companies understand that the frequency of claims, that is the number of claims, predicts risk levels much more accurately than does the severity of claims.

Insurance company recommendations tend to reduce the frequency of claims. In the long run, reduced frequency leads to better experience and greater discounts. Selfishly, you should implement loss control recommendations that lead to lower costs.

For small business, as defined as those that cannot afford an in-house full time safety officer, the insurance company loss control representative acts in that capacity to review the overall loss control picture. Use this service to your advantage. The insurance company wants to reduce risk as much as you do. Of course, the company is less concerned about the budget to do so when you’re fulfilling their recommendations. So, what can you do about costly compliance measures? Ask the loss control representative for help. These professionals are in the field all the time and see many solutions to the same problems. They will have some cost effective ideas.

What other proactive measures can a business owner implement? First, a loss control survey, sometimes called a risk management survey, outlines every process, job, piece of equipment, or operation with regard to safety.

Once your safety concerns are identified, you can manage the risks in two ways: Loss control measures or strategies. A loss control measure reduces the frequency of claims. A strategy eliminates or reduces risk. Loss measures include installing equipment safety devices, controlling environmental conditions, and supplying proper protective gear. Right now would be a good time to solicit feedback from the insurance loss control representative. They have valuable experience in this area.

Manufacturers and contractors are familiar with equipment safety devices, such as guards on saw blades or operator cages. Ergonomics has become a popular form of loss control that ties into safety devices. Differing control knobs, placement of controls and sight lines improve operator efficiency and eliminate unsafe habits.

Environmental controls, for example ventilation and lighting, reduce worker fatigue, unhealthy air quality, and poor visibility. Injuries decrease in frequency as a result.

Proper protective gear might seem a bit old school, but goggles, gloves, hard hats, protective clothing, and even proper work clothing can help to reduce claims.

Installing guards and providing equipment protection is half the battle. Safety must be taught to employees at all levels for an effective loss reduction program. New and old measures should be embraced by management and implemented correctly.

Insurance loss control departments are a good source for safety lesson plans, posters, or even direct employee meetings to teach and discuss safety issues.

Loss control strategies eliminate or reduce risks. Prevention, avoidance, transfer, and separation are examples of viable strategies.

Prevention strategies anticipate future problems. A business can carefully screen driver applicants with background checks, records, and road testing to preclude poor operators from damaging valuable vehicles or injuring third parties. Avoidance eliminates existing or potential risks. The business screens drivers unsuccessfully; and therefore decides to eliminate its fleet and use common carriers. The business has avoided all risks associated with operating vehicles, but not those associated with shipping products.

Separation segregates risk. The business decides to build a second manufacturing site rather than place both lines in the same building. The risk of both lines being destroyed at the same time is greatly prevented because the exposures are separated.

This strategy might allow one site to shut down for difficult maintenance while the second site continues filling orders. Better maintenance is a safety measure granted by the separation strategy.

Transfer strategies include contractual transfers, subcontracting work, and buying insurance. Transferring is usually a legal risk reducing strategy.

Purchasing insurance is a strategy to fund claims. The business might not technically be reducing losses, but it is keeping those losses – premiums – at a tolerable level. This strategy brings us back to listening to the insurance company recommendations.

If you manage the input proactively rather than withhold feedback from the safety representative, in the long run, you will focus on the important issues, eliminate the intolerable risks, and attain affordable insurance premiums.