Top Tips for Assessing Your Workers Comp Program

photo of a face covered in spaghetti noodles
Untangle your Work Comp

What Do I Do?

Those of us who cook know the time-tested technique for testing spaghetti doneness: toss a few strands up against a wall and if it sticks, it’s done – if not, well, it falls off the wall. So, what does spaghetti have to do with assessing your workers’ compensation program?

Many companies
use the dartboard approach to control workers’ comp costs. They look into the global “pot” of work comp practices, pick out one or two, toss a solution against the wall, and hope it sticks. In other words, without really knowing what to do, they decide to “fix” some part of their WC program – an unplanned, unsuccessful and most likely costly approach.

Unfortunately,
more than 75% of companies try to work backwards toward improvement by reviewing the capabilities of their service providers and vendors rather than assessing the key problem areas in their own companies todetermine the types of services ultimately needed.

Worker’s comp costs
cannot be controlled on a “hit or miss” basis. A solid workers’ compensation program begins with a careful assessment of what is in place now, rather than assessing your service provider’s capabilities. Only by analyzing your company’s current trends and weaknesses are you then able to select appropriate solutions and vendors to integrate into a comprehensive cost control program without overlapor gaps.

A reasoned,
impartial assessment and needs analysis is an indispensable part of an overall quality improvement process. It means determining how effective existing program elements are, not merely whether the elements exist. Solutions and recommendations for changes, upgrades or revisions in current practices are then based on a complete understanding of the “key cost drivers,” factors at the root cause of your company’s high costs.

Where Do I Start? Where Do I Start?

As companies
reposition themselves to be more cost effective and competitive in today’s marketplace, a thorough assessment of a company’s workers’ compensation program identifies problem areas responsible for escalating costs. Only after identifying the causes of these costs, can a company evaluate its program and develop a strategic plan to control and reduce workers’ compensation costs.

Workers Compensation Insurance and the BIG Insurance Picture

A Picture of Health!
A Picture of Health!

Workers’ Compensation is a single line of insurance or business considered part of the Property Casualty group of coverage encompassing general liability, property, auto and others lines. Workers’ Compensation insurance may be purchased as part of a package or “mono-line,” as an individual policy.  There are choices involved and decisions to be made in purchasing workers’ compensation coverage just as when you purchase your own auto policy and select a deductible.

Generally, in purchasing a guaranteed cost policy, your premium remains at the price quoted regardless of the cost of the losses.  Because premiums are in part based on payroll multiplied by a rate, premium audits are conducted generating either additional premium or a premium refund.  Other than that, the price paid in the end should be the price your agent/broker negotiated and quoted.  The insurance company funds losses and bears the lion’s share of the risk however it’s in an insured’s best interests to reduce claim frequency and severity to minimize loss costs.  Loss experience is another facet of premium calculation and out of control losses will drive premium costs up.

Depending on the financial strength of your company and your appetite for risk, there are also programs available allowing a company to participate in the losses financially.  These programs include deductibles and retro’s (retrospective rating).  These vehicles allow a company to participate to a large degree financially to control their insurance and claim costs and essentially bear much of the risk themselves.  Such programs may make good sense for organizations with sophisticated loss prevention and strong claim management or oversight in place.  (workersxzcompxzkit)

While workers’ compensation policies may be generic in meeting your statutory requirements, claims and loss control services vary greatly and differentiate one company from another.  Choose wisely.  The effectiveness of these areas will reduce loss costs and even prevent losses from occurring, which in turn reduce your premium.  Evaluate the financial strength of your company, the loss prevention and claim management programs in place and importantly, the appetite for risk at your organization, to decide whether a guaranteed cost or shared risk program is the way to go.  Also be sure to evaluate the financial strength of the insurance carriers under consideration.

Author Robert Elliott, executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers’ Compensation costs, including airlines, health care, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. He can be contacted at: Robert_Elliott@ReduceYourWorkersComp.com or 860-553-6604.

30 December, 2009 08:27:19 Republished with permission from ReduceYourWorkersComp.com