Business owners are always watching the bottom line. As long as the company is makes more money than it spends, a business owner can usually sleep well at night. The inverse of this is also true. Unexpected emergencies, increases in material costs, taxes, and labor costs can cause an owner many sleepless nights.
A great hedge against lost sleep for many business owners is to insure their risks. You wouldn’t think of buying a new car without making sure that you have insurance to cover the cost of repairs if a collision occurs. Likewise business owners insure their facilities, machinery, inventory and their workers against unexpected loss.
You buy insurance coverage with the hope that you will not need to use it to the point that the price goes up. Many people pay car insurance premiums for years and never file a claim. All it takes is one claim however to make car insurance premiums rise.
Why Insurance Costs Are Variable
Insurance companies sell you insurance in hopes that you won’t have losses that exceed their expectations set forth when they give you a quote. Carriers price their product based on several variables like population density, usual weather conditions in the area, proximity to natural or man-made dangers. Where I live in Texas, our homeowners insurance is some of the most expensive in the country due to the frequency of hailstorms and tornadoes. Our auto coverage is higher in Dallas/Fort Worth because of the population density. You get the idea…
Insurance pricing is not an exact science although insurance companies hire hundreds of actuaries in an attempt to make it so. As long as things go as planned, the cost of insurance can be a manageable expense for your business. When things go horribly wrong however, overcoming a huge loss can take years.
What Factors Affect Workers Compensation Insurance Costs?
Workers’ compensation insurance is one of the most expensive components of a business insurance program. In most cases, the rules governing workers’ compensation insurance are set by individual states and costs vary greatly from state to state. In most states, the rules governing workers’ compensation insurance favor the injured worker over the employer.
See also: How Do You Establish a Safety Culture?
When a workplace injury incident happens, the injured worker’s medical bills are paid by work comp insurance. If the injured employee is unable to work for a period of time because of his injury, work comp insurance pays a benefit designed to replace at least a portion of the income that employee would have earned for the period of time he cannot work.
Sounds pretty simple – right? It is as long as your company doesn’t have many injuries or very expensive work comp claims. Injury frequency and severity play a huge role in the cost of work comp insurance. If you’ve noticed a steady climb in the cost of your company’s work comp coverage over the past few years, chances are you either have an injury frequency or an injury severity problem.
See also: Top 10 Most Violated OSHA Standards
9 Ways to Reduce Workers’ Compensation Insurance Costs
Fortunately, all is not lost! There are several things that can be done to control the overall cost of workers’ compensation insurance.
- Do a thorough assessment of the hazards that could cause worker injuries in your business. Depending upon the size of your organization, you might need to have teams of people inspect areas of the business in which they normally do not work. A fresh pair of eyes will see more than someone who works daily in an area. Once a hazard is identified, either remove it completely, engineer controls to prevent employees from being injured or issue personal protective equipment to employees who must work around the hazard. When conditions change, new equipment is added, or if procedures are revised, do the assessment again to make sure that the changes have not created new hazards.
- Develop and implement a written safety program that has rules for employees to follow while at work. Installing a safety program with the full support of management will help foster a culture of workplace safety among the employees. Hold violators of safety rules accountable for their actions – just as you would any other workplace rule – like showing up on time.
- If an injured worker is returned to modified duty status by his treating physician – always accommodate those restrictions and put the injured worker to work in some capacity. Indemnity benefit costs are often the most expensive part of a workers’ compensation claim. Indemnity benefits are reduced when the injured worker is working at modified duty status. It is a fact that workers who return to work on modified duty heal up to 30% faster than those who stay home and watch daytime television…
- Make safety performance a part of the annual employee review process. Employees who consistently follow safety rules and perform their assigned tasks in a safe manner should receive a better evaluation than those who don’t. Safety performance should be a bigger part of annual reviews done for managers and supervisors since they are responsible for enforcing the safety rules in your business.
- Investigate every workplace injury incident regardless of how slight the injury. Know what to do after a workplace injury occurs. Take a critical look at the factors that led to the incident occurring in the first place. Determine whether or not the safety rules, processes, and procedures are sufficient to prevent a future occurrence of the same type. Take whatever steps necessary to remove any hazard that could have caused the injury incident.
- Work closely with the claim adjuster assigned to your injury incidents. Keep current with the medical progress being made by the injured worker. Remember that the claims adjuster is following rules set forth by the state regarding worker injury claims. Pay attention to the rules and assist the adjuster any way possible to bring the claim to a close.
- Request loss runs from your carrier frequently. Depending upon the size of your operation, looking at the loss history on a quarterly basis is usually sufficient for you to get an idea of how effective your safety program really is. Loss runs also help spot injury trends. If you see several occurrences of the same type of injury, it is time to review the safety program rules for that area.
- Partner with a Professional Employers Organization (PEO). PEOs provide access to safety programs, policies, and expert guidance that isn’t available to most smaller employers. For businesses that need to upgrade their approach to safety, a PEO can be a key resource.
- Finally, you should shop workers’ compensation insurance every few years. Insurance agents become complacent just like everyone else. Shopping the competition will help ensure that you are paying a fair price for your work comp coverage.
Following these guidelines will help improve the safety of your workplace. Consistent enforcement of written safety rules coupled with real penalties for violators will help build a culture of safety within your workforce. Connecting with safety professionals in your industry will keep you current on the best ways to protect your employees from workplace injury incidents.