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Business Protection Bulletin


By May 1, 2008No Comments

To the majority of employers, Workers Compensation insurance is just another unavoidable cost of doing business. They never think much about it until they get hit with a rate hike. When rates are low, they don’t give it much thought at all.

However, if employers regarded Workers Compensation as a tool for improving the bottom line, they would find ways to hold on to those low rates over the long-term. The following list represent the most common mistakes employers make that prevent them from maintaining their Workers Compensation savings:

  • Believing that lower rates means lower cost. Don’t assume that if rates have been reduced it will automatically reduce your cost. To establish cost, insurers use an experience modification factor that examines the actual losses of the company being covered. The insurer compares these losses to those of other companies within the same industry classification. If the insured’s past losses are lower than average, the company is given a credit rating that lowers the premium. However, if the insured’s past losses are higher than average, a surcharge is added to the premium before any discounts the insured might be entitled to.
  • Emphasizing injury management and cost containment less when rates are low. Maintaining the focus on safety at all times reduces the number of claims, which helps keep rates low. In addition, employers need to remain alert to issues that impact claims costs, such as lost wages and the cost of medical care. When claims remain open, their costs escalate. This impacts the employer’s modification factor negatively, which increases the cost for coverage.
  • Assuming that Workers Compensation is an expense over which you have little control. You must have Workers Compensation, but you don’t necessarily have to pay an excessive amount for it. Start by realizing that cost reduction begins with the hiring process. Good interview techniques and thorough background checks will result in hiring the right people. But even with the best employees, injuries can happen. For those instances, it is imperative that you have an effective return-to-work program that aids the injured employee in getting back on the job as quickly as possible so as to reduce claim costs.
  • Failing to realize that worker retention is a powerful tool in cost containment. The more skilled your workforce, the less likely they are to have accidents. However, when one of your skilled employees does have an accident, your response will determine whether or not that employee will return to the job after recovering. If the employee feels disconnected during the recovery period, they will probably not return. Here again, an effective return-to-work program is important, because it keeps injured employees in the loop with periodic phone calls informing them about adjustments in policy and procedure, or other workplaces changes. The return-to-work program administrator should also be in constant contact with the employee’s doctor to monitor their recovery progress and determine the earliest date it is feasible for the employee to come back.