Top 5 Ways to Reduce your Workers Compensation Costs
Insurance costs are top of mind for all companies. The expense and the hassle of insurance often creates a dislike for the process necessary to best manage the program.
At times, companies don’t feel they have much control over the cost, which it is a variation of market forces they don’t believe they can influence.
Workers’ compensation is one line of insurance coverage where employers have a great deal of control over the final cost they pay for the insurance. There are multiple opportunities throughout the year to directly reduce costs on the insurance, both short term and long term.
Workers’ compensation coverage is mandated by the federal government, with the authority and administration delegated to each individual state. The nuances of these state variations is another topic of discussion, for now, we will talk about the ways to save costs and control your “price destiny”.
#1 Proper Classification: Many auditors closing out a work comp year have overly interpreted classification rules, often taking an engineer and making them an industrial code because they walked into the production area. Talk with your agent to ensure the common-sense approach is used to properly classify your work force and prepare for the audit questions. The rate difference could be as much as 200% higher from office to shop.
#2 Training & Awareness: When hiring a new employee, the training and use of all safety procedures will help establish best practices. The first impression of safety will set the tone for the job, providing a sense of seriousness to the workplace. Awareness training, reminders, and on the spot correction of safety violations should be continuous to keep the employee cognizant of hazards. This awareness will help avoid mindless injuries (and therefore costs). A general statistical rule in risk management: 600 near misses equates to 10 minor claims and leads to 1 major claim. Awareness eliminates the 600 near misses, lowers the minor, and helps prevent the major claims.
#3 Claims Management: In the event an injury occurs, properly managing the claim can reduce costs of that claim by as much as 60%. Prompt management of the injury or illness means insisting that care be sought immediately, and reporting to the carrier and risk manager in a timely manner. During the recovery period, communication with the injured employee is a must, with light duty work alternatives the best way to engage the employee and keep compensation costs do.
#4 Experience Modification Management (EMR): The claims experience, payroll, and class codes all intersect in a formula that applies a pricing factor to companies’ premium costs. The formula has many nuances that allow employers decision-making authority on ways to better manage the factor and provide a positive impact to their work comp costs. Work with an agency that can offer mod management techniques. Brown & Brown of Detroit clients who have made decisions with mod management in mind have saved $250,000+ in premium over a 3-year period of time.
#5 Culture: Collectively implementing steps one through four will create a “safety culture” amongst your team. The attention to the safety, claims, and management of the work comp program will show the team the company takes this seriously. The well-being of the employee is most important- after all, everyone wants all employees to get home safely each day. The attention to detail and open communication will show the team, by example and action, that workplace safety is taken seriously.
To learn more about cost saving strategies on workers’ compensation for your organization, please contact us or visit our website to read about our consultative approach to insurance solutions.