Archive for the ‘Workers’ Compensation’ Category

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Does Investing in Safety REALLY Pay? – Part 1

Monday, July 6th, 2009

In tough times, when businesses are hunkering down and trimming the fat, one of the most common questions regarding insurance is, “Should I really invest in safety?” After all, things seem to be going just fine. Sure, you’ve had your share of injuries, but who cares? After all, isn’t that what workers’ compensation insurance is there for?

Most employers would rather spend the time talking to brokers, preparing application packets, and shopping insurance carriers in an effort to find the best deal, than invest one dime in safety.

We thought we should step back for a minute and consider how investing time into creating a safe work environment will have a much greater impact on your workers’ compensation rates than shopping carriers.

A Story of Two Warehouses

Let’s take an example of two warehouses, each with $2 million of payroll. One company – let’s call them Warehouse A – spends 3 months choosing a broker and submitting application packets to half-a-dozen insurance carriers. In the end, it receives bids from two carriers. One offers an average rate of 4.6% for a total annual premium of $92,000. The other offers an average rate of 5%, for a total premium of $100,000.

Not bad – an $8000 savings for a couple months of work. Figuring they were set with a great rate, they neglected their safety program, didn’t conduct regular meetings, and were careless around the warehouse. One by one, the injuries started. First a sprained back, then a slip, and eventually a forklift accident that left a worker paralyzed from the waist down. When it came time for renewal, their insurance rates shot up. Why? Because their Experience Modification jumped through the roof.

What is an Experience Modification? That’s another great question, and you should be sure to know the answer. Stay tuned and we’ll get to it on our next post…

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Are You Affected? – Employers Direct Insurance Co. To Leave California

Wednesday, July 1st, 2009

Par for the course in California’s volatile Workers’ Compensation market, another insurance company is exiting the state. Citing intense competition and escalating medical costs, Employers Direct will cease writing new business in California on August 1, 2009.

Read the Press Release here.

Unfortunately, this is nothing new. California has faced a turbulent workers’ compensation market over the past decade, with insurance rates swinging wildly from huge increases in the late 1990′s, to plummeting rates in the mid-2000′s, to rising rates again as we approach 2010. Several large insurance companies have also shut their doors over that same time period, most notably Reliance Insurance Company and  Golden Eagle Insurance Company.

What can you do to protect your business?

You can’t control the workers’ compensation market, but you can control your own company. If you take safety seriously, adhere to the required OSHA guidelines, and diligently manage workers’ compensation claims, you will be in a strong position to negotiate good rates upon renewal. If you ever find yourself in the unfortunate position of shopping for a new carrier, a solid safety track record will make it easy to find a new insurance company willing to take your business.

In our next post, we’ll look at some concrete steps you can take to keep your workplace safe, and ultimately reduce your workers’ compensation costs.

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One More Secret to Workers’ Compensation Savings

Monday, June 22nd, 2009

Our last post reviewed the importance of reducing the frequency of injuries. Accidents happen, but if you notice a repeating pattern of similar injuries, you know you have some work to do.

Today, let’s look at severity, and how it impacts your insurance premiums.

Once an injury occurs, the employee will generally receive medical care. They will be examined by an industrial doctor who will determine the severity of their injury, the necessary medical care, and if they will be required to take time off work.  The insurance company will be responsible to pay for all related medical, rehabilitation and indemnity (time off of work) costs.  The longer an employee receives medical care and remains off work, the more the insurance company pays.

It is in the best interest of the employer to return the employee to work as soon as possible. If an employee is unable to resume their previous job function, the employer is encouraged to incorporate a “Modified Return To Work” Program whereby the employee can return to payroll while performing permitted job functions. This can significantly reduce the indemnity costs and minimizes the negative impact to the employer’s insurance policy. An employer should also be vigilant in reviewing open claims with the insurance carriers and to have them closed and removed from the record as soon as possible.

While you may earnestly want to reduce your workers’ compensation rates, some of these tasks may sound a bit daunting. However, don’t despair. There are many resources out there that help you implement effective safety programs. When you consider the long term savings you will enjoy by reducing your Experience Modification and rates, the up front expense of hiring a professional will be an easy investment choice. Click here to learn more about our Workers’ Compensation Safety Services.


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2 Steps Closer to Workers’ Compensation Savings

Monday, June 22nd, 2009

In our last Workers’ Compensation post we discussed 3 basic starters to keep your workers’ compensation costs down. To recap:

  1. Focus on keeping a safer work environment
  2. Shop around to different carriers
  3. 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.

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Big Workers’ Compensation Changes are O’ Coming!

Thursday, June 4th, 2009

The State Compensation Insurance Fund, or SCIF, the quasi-public San Francisco-based workers’ compensation insurer, announced a mid-year rate hike of 15%, effective July 1. While this may sound like bad news for a quarter of California’s employers who are covered by SCIF, the news could have been a lot worse – the 15% increase is significantly lower than the 27.1% increase recommended by the Workers’ Compensation Insurance Rating Bureau (WCIRB) earlier this year.

Almost ever carrier in the state has also reported increases -

  • Woodland Hills’ Zenith Insurance Co., one of the bigger players in the California comp niche, filed for a 4 percent July increase
  • Two Berkshire Hathaway Inc. entities have filed for 10.3 percent increases
  • Several Guard Insurance Group companies, meanwhile, filed for jumps in the 2.2 percent to 5 percent range.

So what can you do to avoid the inevitable? Here are 3 simple starters…

Be safe! Insurance companies will first view the loss history of an individual company before instituting rate increases. 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.

Shop around. Certain insurance carriers have a preference for specific insurance risks. Some may prefer white collar business, while others may pursue riskier “blue collar” operations such as construction and transportation. As  your broker to submit your renewall to several carriers and compare costs.

Join a PEO (Professional Employer Organization). A PEO is a firm that specializes in managing all the responsibilities relating to employees.  A PEO legally hires a company’s current employees, thereby making the PEO the “employer of record” for taxation and insurance purposes. Because the PEO pools thousands of employees and hundreds of clients, they are able to negotiate significantly lower premiums than any small, individual business could on their own. It sounds complicated, but it’s really very simple – economies of scale.

Click here to find out more about Professional Employer Organizations and to explore the possibility of procuring lower workers’ compensation premiums for your business.

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