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Monthly Archives

March 2012

Mar 01
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WHY EVERY CONTRACTOR SHOULD HAVE E&O INSURANCE

By Construction Insurance Bulletin

Most contractors carry General Liability insurance policies. However, very few understand the need for additional comprehensive Errors and Omissions coverage. To protect themselves from the costly results of unintentional work errors, contractors must have E&O insurance. There are several important issues to consider about this type of coverage.

Contractors are prone to errors and omissions claims. The business risks they face on a daily basis can include unintentional damage to the insured party, impairment of property, damage to products or a wide variety of other damages. Since most courts are quick to rule against contractors in these types of claims, they are much more vulnerable to trouble. Although many individuals view this coverage as unnecessary, it is important to remember that a simple Liability policy does not offer coverage for damages due to errors and omissions. This means that contractors are financially responsible for the costs resulting from client claims. Keep in mind that only E&O coverage offers protection to contractors who face these issues.

Always choose insurance companies that have experience with contractors. It is important to work only with companies that have a solid history of E&O practices specifically with contractors. Policies designed for contractors have special clauses and inclusions that are not found in other E&O policies. The best practice is to avoid relying on coverage titles, and carefully review the document’s provisions. Although every contractor benefits from this special coverage, it is especially important for those who work on design build projects or in construction management. A contractor’s E&O document is written as a claims-made form, which means that it covers omissions and errors occurring during the policy’s period. Incidents occurring prior to the enactment of the policy are not covered.

Carefully read the fine print of the policy. E&O insurance for contractors often has stipulations limiting the coverage capacity named in the policy. This emphasizes the importance of purchasing a policy that is designed to specifically describe the various types of coverage provided. Keep in mind that coverage does not include damages caused by subcontractors. For this reason, general contractors should always hire subcontractors with steady records of quality work. Paying the price for substandard work performed by others is always costly. In addition to being fully aware of what policies provide, contractors must specify their desired coverage. It is important to remember that not all E&O policies offer coverage for legal expenses.

Although all contractors makes mistakes, only those who properly protect themselves are able to recover. Susceptibility to legal action and the high risk of claims are two issues every contractor should keep in mind. Litigation can be costly, so having a solid E&O policy provides security.

Mar 01
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INDUSTRIAL INJURY: FALLING ON THE JOB

By Workplace Safety

Is slipping, tripping, and/or falling on the job a serious problem? According to the Bureau of Labor Statistics (BLS), in 2009, employment related falls accounted for 212,760 injuries including 605 deaths. So, yes, falls are a serious problem.

At a Workers Compensation and medical cost of $70 billion annually, the financial impact is a concern to business people across the United States. Falls can occur anywhere:

  • Slips on spills in a restaurant kitchen
  • Steelworkers on skyscrapers
  • Tripping over an area rug in a conference room
  • Changing a light bulb on a step ladder
  • Carrying a load so vision is blocked
  • Poorly maintained staircases
  • Icy or heaved sidewalks and parking lots

The National Institute for Occupational Safety and Health (NIOSH) researches causation and risk avoidance. Common sense goes a long way toward avoiding dangerous conditions, but more subtle hazards can be avoided through education and training.

Insurance carriers and their loss control professionals distribute much of this information simply by asking. One area of study concerns falls from elevated working platforms. For example, roofers shingling a house need to wear a harness and to tie off to a stable anchor. If footing is compromised, the leash will prevent a worse fall. Pole climbers and bucket truck operations require the same safety measure.

NIOSH researches the elevated platform fall in a virtual reality laboratory. Trades people go through their routines in virtual reality so scientists can observe the human behaviors leading to a fall. When causation is confirmed, safety measures are revisited and improved. The study may determine a front or back connection for the harness to create ease of work or better balance conditions.

Human factors laboratory studies ergonomics and other human stress factors. Posture, temperature, even industrial psychology is examined for potential safety improvement.

NIOSH studies ladder technology to better stabilize, operate, and climb safely. But, construction and utility work are not the only industries where falls are an issue. In 2008, falls were the third leading cause of death in manufacturing.

The movie image of prat-falling stuntmen is iconic. These professionals take precautions to safely perform their tricks. Workplace safety, especially avoiding slips, trips, and fall hazards, however, is serious business.

The next time you walk through your business, look for potential slip, trip, and fall hazards. Are the floors dry? Is the floor space too crowded? Are hallways kept clear of storage boxes? Is the carpet laid correctly and stretched to the walls? Is it safe to walk around your jobsite or business premise?

And do ask our insurance loss representatives for ideas, or educational and training tools.

Mar 01
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HOW TO MINIMIZE EMPLOYEE JOB STRESS

By Workplace Safety

Stress in the workplace can pose a significant threat to the health of a company’s employees and business in general. In fact, studies show that 75% of all employees believe that job stress has increased in recent years, and 25% of employees consider their jobs to be the most stressful aspect of their lives. Stress resulting from problems at work is at fault for more health problems than any other stressor, including family issues and financial concerns.

By definition, job stress is the emotional and physical response that occurs when an individual’s job requirements do not match his or her needs, resources, or capabilities. When an employee experiences ongoing job stress, he may develop injuries or health problems. According to studies, the most common cause of job stress is an overly demanding work environment.

Some employees will naturally experience less job stress than others do. Employees who are less likely to experience stress from work are typically those who have a solid support system of family and friends and a balance between work and personal life. Employees may also avoid stress if they have a positive and relaxed outlook on life in general.

To prevent employee injury, it is imperative that business owners monitor employee stress levels and alter working conditions accordingly. If multiple employees are experiencing problems with job stress, it is likely that the conditions at work are in need of improvement. Common work environment issues that may lead to job stress include improper task designs, bad management styles, lack of interpersonal relationships at work, uncertain expectations, job insecurity, and unpleasant environmental conditions.

When employees are exhibiting signs of stress, the first step in resolving the problem is to determine the nature of the stressor. If poor task design is the cause of the stress, workers may benefit from shorter shifts or more rest breaks. If workers are unhappy with the company’s management style or the lack of interpersonal relationships, they may benefit from more participation in the company’s decisions, more support from supervisors, and a better social environment. When uncertain job expectations are the cause of stress, the solution often involves clarification of employee job descriptions. If employees are stressed because of job insecurity, business owners can make efforts to be open with employees about their future with the company. Finally, if employee stress results from a hazardous or an uncomfortable work environment, business owners should try to address employee concerns and make improvements when necessary.

In some cases, an employee who wasn’t previously experiencing job stress may become stressed because of a change in the circumstances his or her personal life, such as a family member’s chronic illness or the birth of a new child. In such instances, the increase in stress from home can cause the employee to feel uneasy about meeting expectations at work. To cope with this type of job stress, employers should make an effort to accommodate the employee’s needs whenever possible. In many cases, these changes are only temporary. However, if ignored, external stressors may elevate job stress to an unhealthy level.

Mar 01
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HOW DOES SAFETY PAY DIVIDENDS TO THE BUSINESS OWNER?

By Workplace Safety

Time and resources spent on developing a culture of safety repays the business in the long run. Safety cultures rely on reducing the number of Workers Compensation claims, in return, the odds of a disastrous claim are reduced.

Business owners with Workers Compensation experience modifications above 1.25 need to review their safety policies with professionals. It is possible one year or even one claim causes this situation; but it should not be ignored. Discover and repair the root cause.

A 1.01 to 1.25 modification indicates worse than average experience. State rates can be less than adequate for a short period of time. The actuarial or mathematical calculations just incorrectly reflect the average expected claims. Slightly elevated modifications may be caused by these issues; however, review your losses by department in these cases and see if a problem area exists.

For slightly elevated modifications, review the safety program and types of losses. Seek out a professional risk manager for help if needed. Look for patterns in the losses, and consider changes in safety equipment or procedures to reduce problem issues.

Proactively nurturing a safety culture will pay long-term dividends. Experience modifications will decrease with positive results. How?

Each state calculates Workers Compensation experience modifications independently. Many states do utilize the services of the National Council on Compensation Insurance (NCCI) to gather data and promulgate base rates and experience modifications; but each state regulates its own Workers Compensation system.

Workers Compensation experience rating predicts future behavior by analyzing past performance. It is a consequence of loss control performance, neither a reward for no losses nor a punishment for too many claims.

The generic formula for experience modifications follows some rules:

Just as payrolls are the basis for the standard premium, they form the basis for expected claims Payroll is multiplied by an average claim factor to produce total expected claims. A discount factor is then applied to predict the potential severity of the claims.The product of this equation is expected losses. Actual medical only (MO) claims combine and report as a number of claims/total amount. Some states designate the MO claims as primary (maximum average) and excess, and then apply a discount rate to one or both of these amounts. Most states set a limit on the value of any one claim, and then discount large claims on a sliding scale. This historical claim experience is divided by expected losses. That quotient is the experience modification.

The insurance industry spends millions of dollars to find ways to predict the future. Loss analysts discovered one important fact: the best predictor of future claims is the frequency with which companies suffer losses in the past.

Frequency reflects the number of claims per employee, usually expressed as claims per payroll unit ($100), claims per year, or claims per time unit. Frequency, however, more importantly, reflects the safety culture of the business.

If the frequency of claims is predictable, how about the severity of an individual loss? No, severity, the magnitude of the loss, is not predictable. With greater frequency, however, comes greater odds that a severe claim will occur.

Experience modifications indicate the status of the safety culture within a business. Good management listens to risk management and loss control experts who ultimately reduce Workers Compensation costs.

Mar 01
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TRANSPARENT COST, QUALITY DATA CAN HELP YOUR EMPLOYEES MAKE INFORMED HEALTH CARE DECISIONS

By Employment Resources

A lot of U.S. employees have noticed that their employers have started shifting the costs of health plans toward them. And, let’s face it, as the increases in health plan premiums continue to outpace inflation, employers will continue to make such shifts.

Employees will be facing some difficult choices. One such choice would be between paying higher monthly premiums for a plan featuring lower out-of-pocket costs and deductibles -or- paying a lower monthly premium for a plan featuring higher out-of-pocket costs and deductibles. Decisions like this bring the age-old cost, quality debate to the forefront. Let’s look at some facts:

  • Even in the same market and network, the cost and quality of health care can vary greatly from provider to provider.
  • Most employees are baffled by the complexities involved with health care and insurance pricing. The majority of providers fail to see the importance of providing patients with clear and concise pricing information. From in-network and out-of- network, billed charges, customary and reasonable charges, contracted pricing and global pricing, and so forth, the technical language and multiple ways that users are charged make it extremely difficult for employees to understand and compare costs from one provider/facility to another.
  • An employee won’t care what services cost if they aren’t the one paying for the services.

In theory, the success of consumer-directed health plans greatly depends on the employer’s ability to get their employees to think like buyers. The reasoning being that employees paying for some portion of the services will look toward high quality, low cost provider options and lower both their own health care costs and those of their employer.

However, the above theory rarely reflects reality. Most consumerism experts say that shopping for health care isn’t akin to shopping for a vehicle or pair of shoes. Most people wouldn’t hesitate to buy the most expensive vehicle when someone else is paying the bill. After all, the most expensive vehicle must be the best, right? The problem with applying the same theory to health care and trying to create a smart consumer through increasing their out-of-pocket costs is that many consumers, no matter how frugal or involved, can’t get the comparative quality and cost data needed to make an informed decision. The same can’t be said of purchasing a car.

You can help your employees benefit from quality and cost data with these steps:

  • Alert local medical facilities/physicians that their plan favors transparent pricing and high quality, low cost care services.
  • Help them know their choices and what each costs. Health care plans should be designed so that it’s financially encouraging to choose the medical facilities, hospitals, and doctors providing contracted pricing data.
  • Have ongoing monthly education about network choices and how these choices impact what they and everyone else spends on health care.
Mar 01
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DESPITE POTENTIAL PPACA PROBLEMS ON THE HORIZON, HSA ENROLLMENT CONTINUES TO RISE

By Employment Resources

Since Health Savings Accounts (HSAs) were first authorized in January of 2004 as a tax-advantaged portal for medical savings, America’s Health Insurance Plans (AHIP), which is a trade association representing the health insurance industry, has conducted an annual survey of the HSA market. According the 2011 AHIP survey, HSA plan enrollment in the United States has almost doubled over the last three years, going from 6.1 million participants in 2008 to 11.4 million participants in 2011. From 2010 to 2011, the number of Americans covered by HSAs linked to high-deductible plans (HDHPs) increased by 14%.

Other key findings from the AHIP survey are:

  • Large-group coverage was the fastest growing market for HSA plans between 2010 and 2011, with a growth of 26%.
  • Individual market coverage was the second fastest growing market for HSA plans, with a growth of 15%.
  • More than 6.3 million individuals were enrolled in HSA plans in the large-group market.
  • Around 2.8 million individuals were enrolled in HSA plans in the small-group market.
  • Approximately 2.4 million individuals were enrolled in HSA plans in the individual market.

The Impact Of The Patient Protection and Affordable Care Act On HSAs

As it relates to HSA plans, AHIP has noted that some of the provisions in the Patient Protection and Affordable Care Act (PPACA) could create some potential unintended consequences that might disrupt, if not limit, the availability of HSA plan coverage. Three of the main problems noted by AHIP include:

1. Medical loss ratio regulation. This requires an insurer to spend 80% or more of a consumer’s premiums on direct, non-administrative patient care and improvements to such care’s quality. AHIP asserts that medical loss ratio regulations will be especially problematic for HSA-eligible HDHPs. Participating in a qualified HDHP is a requirement to participate in an HSA. HDHPs provide individuals with a low-premium, high-deductible alternative to traditional health plans. These plans might have lower benefit costs, but they certainly aren’t always cheaper to administer from a per-enrollee standpoint. As a result, they may naturally have lower medical loss ratios.

2. Over-the-counter (OTC) medication restrictions. After 2011, funds from HSAs can’t be used to purchase OTC medications unless the individual has a prescription in hand. By limiting consumer access to many common OTC drugs, such as those used for allergies and colds, consumers will be left in default to use more expensive prescription drugs.

3. Minimum actuarial value requirement. Each level of insurance coverage (platinum, gold, silver, and bronze) sold in either the small or individual market will be required to meet a level-specific minimum actuarial value starting in 2014. The actuarial value is a dollar value based on the average benefits expected to be paid out by a particular plan. Bronze, which is the lowest level, will be required to have at least a 60% actuarial value. Under the Patient Protection and Affordable Care Act, the Secretary of Health and Human Services is to institute a process that will determine actuarial values. The health care reform law specifically instructs that the HHS Secretary may include annual employer HSA contribution amounts within the actuarial value calculation. Of course, this wording means annual employer HSA contribution amounts may not be calculated. AHIP recognizes that including this in the calculation will help to ensure continued consumer access to affordable, high-quality coverage since inclusion will considerably increase the probability that HSAs will meet the minimum requirements.

In closing, AHIP’s survey clearly reflects that HSA enrollment is steadily growing. Policymakers should recognize that HSA plans are more important than ever when it comes to U.S. consumers having access to affordable, quality coverage.

Mar 01
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BEHAVIOR-BASED DESIGN PROMOTES HEALTHY LIFESTYLE CHANGES

By Employment Resources

According to the Centers for Medicaid Services, at $8,086 per person annually, the United States spends more per capita on health care than any other country in the world. However, at least half of the country’s population has one or more chronic diseases, 33% are diabetic or pre-diabetic and 66% are overweight or obese. These statistics came from the U.S. Centers for Disease Control and Prevention. Lack of exercise, poor nutrition and smoking are three leading contributors to such a high percentage of unhealthy people.

Promoting a Healthy Lifestyle. People are naturally wired to keep doing what they’re already doing. If there is no incentive to change, even if it’s beneficial, they won’t. This also applies to offering passive open enrollment. Employees are more likely to keep their current coverage. VBID is a new insurance design based on value. It also encourages wellness proponents. The main idea is to match patients’ out-of-pocket expenses with heath service values. Different levels of value are recognized in this approach. By making high-value treatments more available and discouraging low-value treatments, this approach works to yield improved health outcomes on all health care expenditure levels. Research shows that barrier reductions improve patient compliance for recommended treatments.

In addition to increasing compliance for treatments, this approach has also been shown to increase compliance in patients who need regular medication. A study performed by the Center for Health Value Innovation and the University of Michigan Center for Value-Based Insurance Design showed that patients with chronic illnesses who required medication were more willing to take it. Their cooperation for preventative services was also better. However, there is still one troubling issue, which is people who have the opportunity and encouragement to comply but don’t. This has left researchers wondering what is missing from the VBID approach that is necessary to make such people more compliant. The solution is to implement the use of loss aversion and productive tension to raise individual involvement for improving healthy behavior.

Raising the Productive Tension Level. The main idea of productive tension is to create a program that gives enough initiative to provide patients with a positive reason to change. In order to be optimal, productive tension needs to have four different components:

  • Information – Although it increases knowledge, it doesn’t always encourage action. If it did, the country’s population would be rich, fit and happy. After purchasing $46 billion on diet and self-help books in 2010, Americans still need help.
  • Infrastructure – This includes having the right tools, technology and resources to help people. Keep in mind that infrastructure alone doesn’t necessarily initiate action.
  • Incentives – Nothing works better for motivation than a reward. Financial rewards are especially enticing. These still may not initiate action in all people. In a Global Survey of Health Promotion and Workplace Wellness Strategies, only 48% of employers stated that their incentive programs were minimally effective.
  • Imperatives – These are important for accountability and understanding. People need to know what they must accomplish, why they need to do so and what happens if they fail.

Applying the Behavioral Design. One illustrative example of applying the behavior-based design is depicted by Safeway. The supermarket chain’s CEO, Steven Burd, said that 70% of his employees’ health care costs were because of their own behavior. In addition to this, 74% of those cases included four major chronic health conditions. The conditions were cancer, diabetes, cardiovascular disease and obesity. During the following five years, the supermarket chain redesigned its health care infrastructure. Their new focus, after launching the Healthy Measures Initiative, is consumer-based strategies. As a result of the positive changes, Safeway has seen a great increase in voluntary participation among their workers for controlling and preventing these conditions.

Solutions for Creating Tension. There are several different ways to encourage participants to become healthier. The following are a few good examples of beneficial changes:

  • Health Requirements – Having employees pass an annual physical and health exam is a great idea for an incentive.
  • Company Gym – While providing an outside gym membership may be effective sometimes, having a gym or fitness center in the workplace is even more effective.
  • Company Contests – Hosting contests that all employees can participate in is beneficial. Weight loss or health competitions with cash prizes and contribution pools are extremely successful.

The bottom line is that increasing tension to promote a healthy lifestyle change is the best way to make it happen. People are much easier to convince when there are both incentives and rewards.

Mar 01
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BUILDING A BETTER SAFETY PROCESS, THE UPS WAY

By Risk Management Bulletin

UPS, the world’s largest package carrier, has slashed its workplace injury rate by 40% and reduced auto accidents by 33% through its Comprehensive Health and Safety Process (CHSP).

Although few companies are as large as UPS, businesses of any size can apply these CHSP principles.

The backbone of the program is the nearly 4,000 safety committees at UPS facilities around the world. A non-management employee usually leads the committee, supported by a management co-chair. These groups are responsible for finding and fixing problems. They have full power to take action, which sets them apart from traditional safety committees led by managers who often simply tell their workers to quit getting hurt. CHSP expects employees to make the changes that will keep them from getting hurt. Each committee also develops a 15-month action plan to tackle long-term safety goals.

Every day at every UPS operation, drivers gather for a three-minute communication that might address a new service or other key information they need. These mini-meetings always include a “safety share” or tip on such topics as railroad crossing risks, distracted driving, or safe lifting. Although the tip is brief, the consistency of practices underscores management’s commitment to keeping workers safe.

Five years ago, UPS introduced an innovative practice by creating “safety zones,” physically delineated areas in each facility where drivers and other workers gather. The zones might include computers for online research, information boards, and space for holding safety presentations. Some locations have even introduced light workout equipment. Carving out a dedicated space devoted to safety helps underscore its importance and makes the commitment more visible. These zones are inexpensive to create and are clearly proving their value.

UPS believes in promotion from the ranks. The company, known for employee longevity, encourages employees to grow in safety as they grow in their jobs. It’s common for a part-time loader to become a driver, then a supervisor, and then a manager, with safety responsibilities added along the way. Encouraging long-term employees to take on safety duties helps create buy-in and strengthens the safety organization.

Take a leaf from the UPS safety book!

Mar 01
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TEN STEPS TO PROTECT PED DATA

By Risk Management Bulletin

Thousands of businesses are storing terabytes of confidential business and personal information on laptops, tablets, smartphones, PDAs, removable disk drives, flash memory cards, etc. — leading to a spate of highly publicized security breaches involving the loss or theft of equipment containing customer records, Social Security numbers, drivers license numbers — and more. Your business could be next!

Both federal legislation (such as the ADA, FMLA, and HIPAA) and a variety of state laws require companies to keep customer and client information confidential and to report the disclosure or theft of this data. To protect themselves against liability for these leaks and to manage the risk, more and more businesses are tailoring security policies for their Personal Electronic Devices (PEDs)

Your policy should follow these guidelines:

  1. Require encryption of all data on PEDs that carry confidential records.
  2. Implement “pass phrases” containing letters, numbers, and symbols — and change them frequently.
  3. Secure wireless networks with firewalls and passwords.
  4. Create a two-step authentication process when using a PED for remote access.
  5. Use cable locks for laptops and place them and other PEDs in locked storage when not in use.
  6. Have a “time-out” function for mobile devices that requires user re-authentication after 10 minutes of inactivity.
  7. When feasible, require that the PED be marked as company property.
  8. Have your IT department record the model number and serial number of all PEDs and store digital photographs of each device.
  9. Create an automatic login to access to the PED and its confidential data.
  10. Allow copying or extracting access only with two-factor authentication.
Mar 01
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KEEPING YOUR OLDERS WORKERS SAFE

By Risk Management Bulletin

Focusing on the health and safety of your older workers can help reduce injury-related losses.

Health care costs, Workers Compensation spending, and worker productivity are factors that employers must consider as the nation’s workforce ages.

This is because older employees’ physical condition, such as deterioration caused by age or chronic disease, can affect how they respond to potential hazards on the job, according to the National Institute for Occupational Safety and Health (NIOSH).

The number of older workers will continue growing rapidly, as the negative effect of the recession on worker savings, employers’ desire to retain skilled workers, and rising health care costs are keeping more older employees on the job. The Bureau of Labor Statistics projects that workers aged 55 and older will make up nearly 25% of the workforce by 2018, up from 18.1% in 2008.

However, many employers aren’t adequately prepared or even aware of the health and safety risks that older workers present, says NIOSH Director Dr. John Howard. He notes that, although older employers are generally less likely to suffer workplace injuries, it takes longer for them to return to productivity when they do get hurt. “Employers who aren’t aware of this probably aren’t trying to manage their workforce the best that they could. In other words, they might not be looking at the health care costs of their workforce or asking what could make the work safer or healthier for older workers. Some employers don’t even know the distribution of ages of the people who work for them.”

The situation is critical today because the recession has left even fewer baby boomers financially capable of retiring, says ASSE president Terrie S. Norris. “At the same time,” she points out, “employers generally haven’t helped employees prepare for retirement adequately, while Boomers (born between 1946 and 1964) are healthier and living longer than previous generations,” This longer lifespan means that more people will have to work longer.

Increasing medical costs might also force older workers to delay retirement, especially those with chronic medical conditions that can add to workplace health and safety concerns. A series of surveys by AARP over 13 years found that Boomers plan to work into their retirement years because of financial necessity, the need for health care coverage, and other factors, such as personal enrichment. The latest AARP survey, in 2008, revealed that 70% of respondents planned to work into retirement — and this was before the recession hit.

That’s why it makes sense to provide older workers with tools and work processes that reduce the probability of injuries. Our risk management professionals would be happy to offer their advice — just give us a call.

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