Managing Workers’ Comp Costs
One essential element in managing worker’s comp costs is communication with your insurance broker. When reviewing your worker’s compensation programs with your insurance broker, communication is a key to minimize costs. As an employer another key element is to ensure that injuries are managed effectively and that there are plans in effect to help prevent injuries, be prepared if there are injuries, and offer program development and testing to improve on existing plans. Because when there’s no communication and as an employer, injuries aren’t managed effectively; the result is that premiums go up, the experience mod goes up, and profits go down. This could be the kiss of death for a lot of businesses.
Case in point: An agent whose client was a large window and door manufacturer based in the Southwest.
The client was perplexed when he had an experience mod worksheet that showed a $75,000 claim and a loss-run that showed the claim valued at $32,500. The client thought obviously there was a mistake here, because those were two very different numbers.
The reality of the situation is, the valuation date is 18 months after a policy’s inception and every year after. This is an important date because that is when the insurance company sends all employee injuries, both paid and reserved to the ratings bureau, which sets the all-important experience modification. And in this case the claim was valued at $75,000 on the valuation date and was resolved some time after that. This approximately $40,000 difference resulted in their Experience Mod being several points higher than it could have been, costing the employer thousands of dollars.
The first rule of thumb here is you must communicate with your insurance broker concerning any unresolved employee injuries. And an involved insurance broker will inquire into your employee injuries. In fact, 90-120 days before the valuation date, agents should be looking at loss-run reports, to determine what is unresolved and what is still open, and more important, why?
Bottom line: Injuries that can be closed out should be closed out. Keeping them on the books is nothing more than an accelerant to fuel an increase in the experience mod. And a high experience mod can imply the company has a serious defect in its workplace safety culture, and as a result you will not only be paying higher premiums but, in certain industries, get shut out on bidding on major projects.
At The Armstrong Company Insurance Consultants, we care about our clients and their business and financial well-being. Learn more about our Risk Management Services and how we strive to help clients mitigate their risks.