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Construction Insurance Bulletin


By March 1, 2010No Comments

In 2008, U.S. employers reported 3.7 million nonfatal occupational injuries and illnesses, according to the U.S. Bureau of Labor Statistics. Although this number was down from the prior year, it still shows that workplace safety must be a priority for employers. When workers get hurt or sick on the job, productivity suffers, the employer becomes less attractive to the other employees, and managers’ attention shifts away from growing the business. Preventable accidents also hurt the bottom line in another way — they eventually raise Workers Compensation costs by increasing the employer’s experience modification factor.

The experience mod is a number calculated by the Workers Compensation rating bureau in the employer’s state. It’s a reflection of how the employer’s loss history for the prior three years (not including the current year) compares with that of an average employer in the same industry. It takes into account the size of the employer’s payroll for those years, and the number and severity of its losses. The formula penalizes an employer more for frequent losses than for expensive ones. For example, an employer with 10 losses of $3,000 each will have a higher experience mod than will a similar employer with one loss of $30,000. The insurance company must, by law, multiply the employer’s Workers Compensation insurance premium by the experience mod factor. A factor of less than 1.0 reduces the premium, while a factor greater than 1.0 increases it. Therefore, it makes financial sense for employers to take steps to prevent frequent on-the-job accidents.

There are several things employers can do to improve their accident records and save on Workers Compensation premiums.

  • Make workplace safety a top priority. The things that are important to managers become important to workers. Provide continuing training to workers on job site safety and enforce safety requirements.
  • Obtain and review publications about the industry from the U.S. Occupational Safety and Health Administration. These publications provide practical recommendations for preventing injuries. For example, the “Construction – Hand and Power Tools” category has a document titled, Safeguarding Equipment and Protecting Employees from Amputations.
  • Keep the work environment clean. This reduces the risk of employees contracting airborne illnesses; eliminating clutter makes trip-and-fall accidents less likely.
  • Maintain machinery and equipment in good working order. Check it regularly for safe operation.
  • Institute programs to keep the workplace drug and alcohol free. Within legal parameters, test employees for drug and alcohol use.
  • Review loss information from insurance companies. Look for trends in the types of losses that occur. They could indicate dangerous work procedures, incentives that cause employees to rush, defective tools, or another factor in need of correction.
  • Take advantage of the expertise in the insurance company’s loss control department, particularly if the company specializes in insuring businesses in your particular industry. They can recommend measures that have proven to work for similar businesses.
  • Monitor employee morale. Unhappy workers can become careless or slipshod in their work. Take steps to improve morale and to deal with employees who might be causing problems.
  • Review the experience mod worksheet with one of our insurance agents. Ensure that the insurance companies have reported all losses accurately to the rating bureau. Ask to have errors corrected, and follow up until it happens.
  • Require employees to report all injuries, no matter how minor they appear. Make sure that injured employees receive prompt medical attention.

No one benefits when employees get hurt on the job. With focus and effort, employers can make workplace injuries less frequent and less severe. That will make your business a better place to work, and add hard-earned dollars to the bottom line.