In our last Workers’ Compensation post we discussed 3 basic starters to keep your workers’ compensation costs down. To recap:
- Focus on keeping a safer work environment
- Shop around to different carriers
- Consider working with a Professional Employer Organization
Despite the state-wide increases, insurance companies view the loss history of an individual company before bumping rates. Companies can actually achieve a reduction in rates, even while the state bumps them up.
The Loss Ratio (the ratio of losses paid out versus premiums paid in) is the most important factor in determining rate increases. Even while published base rates state-wide may be increasing, a company with a low loss ratio can still experience a decrease. There are two ways to keep your Loss Ratio low: 1) decrease the FREQUENCY of accidents, and 2) decrease the SEVERITY of an injury when it occurs.
Let’s discuss FREQUENCY:
When reviewing loss ratios, the insurance companies analyze how often injuries occur, and if they are of similar type. Similar injuries that repeat themselves time and again (slips and falls, or back strains, for examples) indicate a weakness on the part of the employer in that area. Improved training and awareness will help reduce the frequency of these injuries. On the other hand, common, unrelated injuries may indicate a general lack of training and give the employer reason to pause and assess their workplace safety on a whole. They should review and update their Injury and Illness Prevention Plan, institute regularly scheduled safety meetings, and implement incentive/bonus program that recognize and reward workplace safety.
In our next post we’ll look at SEVERITY, what it means, and how it can impact your rates.