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It's the tail that wags workers' comp costs

September 19, 2010
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It often seems that workers’ compensation coverage is closer to a chronic disease than protection for injured workers.

Every time someone says, "It’s finally fixed," we can just about count on workers’ comp rates going up again.

Perhaps workers’ comp is a chronic condition since, at any given moment, it’s an issue in at least one state or another.

Worse yet, injury claims drive up employers’ rates for years; or, in insurance lingo, workers’ comp has a "long tail". When an injury occurs, the insurance company sets aside "reserves" to cover the estimated cost of the injury until the case is closed.

In many situations, a case can go on for years –– sometimes even longer.

If the costs are so enormous, why isn’t more being done to reduce workers’ comp expenses? As might be expected, large companies are generally in the forefront when it comes to loss prevention. What about the smaller ones?

Little guys can measure up
To stay competitive, smaller firms need to catch up fast. Here are four things that can be done:

  1. Enlist your insurance broker in helping you build a loss prevention program. Take the initiative — don’t wait for your broker to come to you. Rattle your broker’s cage. Remember, it’s your money paying workers’ comp costs.

    If your broker sends an insurance company loss-prevention representative to assess your operation and make recommendations, that isn’t enough. Don’t settle for it. It’s probably bare bones.

    For the most part, the recommendations are minimal and made from the insurance company’s viewpoint –– not yours. If you’ve gone through this, you know there is little or no follow up, and training is almost non-existent. In other words, it’s inadequate.

  2. Require your insurance broker to audit your workers’ comp records. Start with the view that there are mistakes –– and they’re costing you money every year. Have your broker do the following:
    • Audit your premiums. Are they correct? Workers’ comp reports are known to have errors that cost you money.
    • Audit the Experience Modification Factor. Are your employees classified properly? If the experience mods are incorrect, you could be paying too much.
    • Audit your claims history. You may be surprised to discover that paid claims are still open, again costing you money.
    • Audit the way employee injuries are managed. Are there procedures in place for medical care, and are they being followed?

    When mistakes are found, expect your broker to take action to help you correct them.

  3. Expect your broker to prepare your company for its annual workers’ comp audit. The audit is your workers’ comp presentation. Since you wouldn’t think of making a sales presentation without proper groundwork, avoid walking into an audit unprepared. If your broker finds there are overcharges, get that information ready to present to the auditor.

    Unless you’re a workers’ comp expert, look to your insurance broker for the assistance you need. Your goal is to present your company in the best possible light.

  4. Develop a company culture that’s committed to loss prevention. Look to your insurance broker for assistance. Carpal tunnel syndrome injuries are rampant in offices, as are stress-related illnesses and back problems. Given that the current costs of these injuries are enormous, follow these guidelines for cutting your workers’ comp overhead:
    • Make safety a hiring issue. Reference checks of prospective employees should include safety and injury records, and any workers’ compensation history.
    • Develop a loss prevention program. Working with your employees and insurance broker, create a program that fits your needs. However, its success will depend on the commitment of top management.
    • Arrange for proper medical care for injured employees, making sure the medical service you select understands job injury issues. Studies show that prompt, aggressive treatment gets workers back on the job faster.
    • Stay in close touch with the injured worker. A company representative should go with the injured employee for initial treatment, and daily contact should be maintained at first.
    • Get the injured worker back on the job as quickly as possible. When workers return to the job quickly, there is less chance for an adversarial attitude to develop — decreasing the likelihood of legal action.

Loss prevention is the only way to hold down workers’ comp costs in the long term. If this message isn’t strong enough, then perhaps this will help: Workers’ compensation acts as a tax on workplace injuries.

When it comes to employee injury claims, it’s the tail that wags workers’ comp costs.


Tom Helbach is president of Mosinee Insurance Agency, Inc., Mosinee, WI. Founded in 1934, the agency specializes in business insurance. A Certified WorkComp advisor, he can be contacted at 715-693-2100 or tomh@mosineeins.com.
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