Insuring the Future: AI Tools for Modern Brokers

Rancho Mesa President David Garcia sits down with Erik Vandermaus, Executive Vice President with BrokerPRO, a data and insight company that’s transforming the insurance industry, to discuss how their technology is empowering brokers to streamline workflows, personalize client interactions, and stay competitive in a rapidly evolving market.

Dave Garcia: Hi everyone, you're listening to Rancho Mesa's Studio One podcast, where each week we break down complex insurance and safety topics to help your businesses thrive. I'm your host Dave Garcia, and today I'm joined by Erik Vandermaus. He's the Executive Vice President with BrokerPRO, and today we're going to discuss this platform and what's on the horizon with it. Erik, welcome to the show.

Erik Vandermaus: Thanks so much, Dave.

DG: So, Eric, let's just jump right into this thing. What led you and your team to start BrokerPRO?

EV: Well, I really appreciate the opportunity here. And it all started with our president, Nezih Hasanoglu's vision back in 2023 to create an insight and automation company that would do just that, bring solutions to brokers that would more effectively harness, leverage, and monetize their data and then share that high quality trusted data with other like-minded brokers to create a national benchmark across P&C, EB, and other areas.

So Nezih is our president of BrokerPRO and then I lead our data product development efforts. And about two years ago, two and a half years ago, I was a managing director at Accenture, which is a global tech consulting firm, and I was creating those same data analytics, digital and CRM solutions for my clients in the insurance industry.

DG: Okay.

EV: And so now I get to bring those same technologies to the broker space.

DG: Awesome.

EV: Yeah, it's been such a blast to work with Nez and others in the space. And the key for me has really been the ability to make an impact and deliver value to those at the trading desk. Those that are producing and need an edge to increase their win rates, go up market, and free up time so they can spend more of it with their clients.

DG: So in working with Nez and looking around and doing your research, what were some of the biggest frustrations or inefficiencies you saw brokers facing in the insurance marketplace today and how do you think BrokerPRO’s going to be solving some of them?

EV: Yeah, great question. BrokerPRO is a data and insight company. And our mission is to digitally enhance the client experience by harnessing and leveraging data for value at the trading desk. And so we start with a phrase by brokers for brokers, meaning that it's in our DNA, our funding, our leadership is from the broker space. And why does that give us an edge? It means we're close to the problems because we see them when we walk down the hall and see someone spending hours creating a benefit guide, or see someone using other generative apps that really aren't tuned to the specific task and are inherently just not going to be as accurate as some of our solutions are. And so what we see for biggest frustrations, inefficiencies at the trading desk, there's so much unnecessary times moving things around, taking data from here to there, spending 10 hours creating a benefit guide, as I mentioned, or comparing two policies or a quote to a policy, or spreadsheeting information. It's time that could be freed up. And so this is why we created one of our products called GenPro, which I'll talk more about.

And second, brokers can no longer rely solely on the strength of their relationship with a prospect or client to win and keep their business. Yes, relationship will always be critical, but not sufficient. And that's really because of the buyer of today. And, you know, that new CFO, that's 35 years old, they went through college during the 2008 financial crisis. And they were trying to find their first job around that time. And that has significantly shifted how brokers need to approach them, more towards a strategic risk-aware partnership mindset. And they value resilience, data-driven insights, and long-term value. And so that's how we need to meet them, where they're at. And that's what BrokerPRO is doing.

EV: So you mentioned a lot of things there. And your customers will be brokers like Rancho Mesa, and other agencies across the country. And then we'll be able to deliver these benefits to our customers and clients and hopefully talk to prospects about the benefits of things as well. So is there, is that, do you have any success stories that I know, you know, what's the genesis of BrokerPRO? How long has it been out in the marketplace? And then maybe you can share a couple of success stories with us today.

EV: Yeah, we just started with our marketing efforts this year and we have six brokers on platform now and we're growing. And back to that CFO, they want a national benchmark and that trading desk wants efficiency. That's what BrokerPRO is solving for. And so I'll give you some numbers, success stories: 31, 106, and 20.

First, riffing off that national benchmark comment, producers that use BrokerPRO's data products see new business win rates 31% higher than those that don't.

What's more, producers that use our data products see their average win amount 106% higher than their peers. And that's because they're using data products within the pro suite benchmark, national benchmarking for P&C as well.

And a producer recently who was doing a P&C renewal, client wanted to change carriers. They weren't happy with the carrier from a work comp. claims perspective. But the producer was able to bring this trusted national benchmarking to show that their rate is lower than their peer. They argued that they shouldn't go to market and that the client immediately agreed. So again, back to that CFO, they want to see data to back up the recommendation.

Even more, brokers need to free up time. And so 20 comes from freeing up 20% of time at the trading desk when our generative AI GenPro is used. Users are saying that it's saving them on average an hour and a half per day. And that adds up over a week, that's 20% of your time for the week.

DG: So I know we're going to discuss some of the products specifically here in a second Erik, but I'm curious you've mentioned a lot about the producers and the impact to them. Do you see this as a tool that the client management staff will use as well? Maybe you can share a little bit about how they're using this in their day to day. I'm sure it's saving them time too.

EV: I love it. Yeah, absolutely. Yes, 100%. So GenPro, our generative AI app is tuned for the work that a client manager is doing all day long. And that's where we see the greatest use. And that that's where we see that hour and a half savings per day.

For an example, I was I was on with one of our subscribers. And the client manager was talking about a benefit guide accuracy check she was doing and she put it through GenPro and she found another claim in the template because the template is often reused. It happens and her manual check wouldn't find it but GenPro found it. Saved her a lot headache.

DG: Oh for sure. Yeah that's great. You mentioned GenPro. What else is contained in the BrokerPRO model?

EV: Yeah we talk about our pro suite starts with GenPro. That's private, secure, generative AI. It's tuned to perform like an insurance broker's assistant, and it's been configured to be accurate. So unlike Copilot or other Gen AI apps, we've turned its creative abilities all the way down. It is focused on accuracy and to sit alongside you, and that's what's driving the time savings. It's so fun to hear the users when they get into it, “It saved me 10 hours here. This is what I was doing.”

So, really fun and exciting to see what they're doing with it.

DG: Erik, you'll quickly recognize I am not a tech leader like you are. So, let me ask a couple of questions at my level of tech understanding. When we talk about GenPro, I'm concerned that you always hear, at least that I hear, is that somehow we're going to let information out of our office, out into wherever that goes, making it accessible to other types of AI products, can GenPro go out of the system to seek information, other than agency information?

EV: Great questions. The answer to the first question, no, it cannot leak data out because we take a copy of the large language model. And so whenever you're interacting with it, it's using a copy that it's talking to.

DG: I see.

EV: So that public model is never able to see anything you upload to it. So that's a really important piece. Users also have self-contained security. They can only see their own documents, et cetera. We don't want it to go out and find data externally. I will caveat that to say, though, although we are and we do have the ability to ask or have GenPro look at files coming from the AMS. So for example, one subscriber has over four million files that they've downloaded from Epic and GenPro is able to look at those and use those, but it's all contained, self-contained within that subscriber.

DG: Okay, so many of us—Epic for the audience is an agency management system that many agencies probably the 75% probably of the agencies in the United States use Epic. So what we're saying then, Erik, is that GenPro and Epic can communicate with one another? So the information that's in Epic is accessible to GenPro?

EV: Correct, it is.

DG: Okay. I'll tell you, as the agency owner here out in Southern California, that is one of our biggest needs is to, we've got these sources of data, whether it's in our agency management systems, on Excel sheets or wherever and finding some kind of a product that can talk with each of those and extract data from it and then put it into some usable, readable tool is huge.

EV: Yeah, so exactly.

DG: And maybe that kind of leads to my next question. How does BrokerPRO kind of stand apart from all these other insure-tech products? I get an email a day, you know, from the next greatest, you know, insure tech product. How does BrokerPRO stand apart from all of those?

EV: Indeed, there's so many options out there and brokers are spending so many hours just evaluating solutions and weeding through it. Here's BrokerPRO's superpower that cuts through all that. We're by brokers for brokers. By brokers for brokers. We were born from a top 50 broker here, M3 insurance. That gives us a tremendous edge over other insure-techs by being close to the problems that brokers face.

That said, we're also independent and we operate separate from the parent. And so we've solved the national benchmark data problem with high quality trusted data and efficiency with GenPro. And now if you start to put those two together, high quality national benchmarking with Generative AI, if you start to mix and match those tools, which you can do on BrokerPRO, that becomes a competitive edge over these other insure-techs that only do one or two or three things separately. We can mix and match those together.

DG: So Erik, as you grow this membership, I think you mentioned currently have six or seven agencies that are now BrokerPRO subscribers. Is there any abilities to use the data within that group as a benchmarking tool for all the members without obviously being account specific or something like that?

EV: Absolutely that's the beauty of our benchmark pro products both for P&C and employee benefits and that's the beauty of the BrokerPRO platform because we're able to share data with like-minded firms. And we de-identify, we anonymize that data so you can't see the actual name of that client, but you can benefit as a broker by calling up what that national benchmark looks like when you are competing for business and you want that broader perspective.

DG: Yeah, that's a big help for agencies like ourselves. As I mentioned, we're in Southern California is where our corporate offices are, but we do business in 22 different states, and you roll into a state that you're not familiar with, you've got an opportunity there, you really don't know the marketplace, what carriers are really active there, and what are not. So it sounds like this tool would be a big asset for us to say, “Hey, we're looking at a plumbing contractor in Missouri, can you give us an idea of which carriers are being active in that marketing space?”

EV: Yeah, and you can trust it because you know where that data came from. You know that that peer firms that aren't competitors with each other, but we're sharing data in order to help each other win against the national firms that just have national benchmarks just based on their size.

DG: Yeah, so, you know, I'm going to be selfish here for a second because this next question probably Fits myself and our agency, you know spot-on but give me a piece of advice that you give to other brokerage agency leaders like myself who are working on their AI strategy within their own firm. Most of us do not have somebody like Erik that we can just say, "Hey, Erik, can you look into this for us?"

What advice can you give me or give us all?

EV: Yeah, absolutely. So if you're evaluating insure-tech and AI, which most of us are, you're in this endless loop of analysis. There's just so many options. So I encourage you to prioritize the platforms that are scalable enough on the number of use cases they can solve for you versus having to evaluate and buy a separate solution for every use case problem you face. And that is one of the major benefits of BrokerPRO because we've got close to the problems, and we're able to see across those areas, P&C and EB then mix benchmarking with AI together. If you focus on those things, that will really accelerate your time to value in your shop, and selfishly, it will also lead you to BrokerPRO.

DG: Yeah, right, sure. Well, you know, I think, you know, I've had a few conversations about this, so you enlighten me to a lot, and I like the idea of kind of reverse engineering the needs basis, like what's the outcomes? What's the output we're looking for? And then is that something BrokerPRO can do? And if so, how does that works?

So--versus, and we've already sat through a number of different meetings with different other vendors and it's overwhelming, you know, they can all do everything, most of it we don't need and you get confused. And then, you know, I don't know if this is a real term when I made up, but I feel like there's AI stacking, you know, where you start laying product on top of product on top of product, and you don't know which one's doing what the best. So, sounds like BrokerPRO’s, I like the idea that it's reverse engineered from the broker standpoint. You know, it's written by our needs, and that's a consensus of needs. And then with the growing group of members, there's probably going to be new needs that are going to apply to all of us to help us. So that makes a lot of sense. So Erik, before we wind down, where's BrokerPRO going next? What are you guys working on? Give us a little tip.

EV: So, you know, even if your agency is growing 10 to 15 percent a year, there's likely friction points all over your agency, slowing you down from even that next level of growth. So think about all of those friction points. One of those that we've heard from our subscribers is benefit guide creation. We all know that it takes so long to create those things, and one client may have 10 different files that a client manager, someone at the desk, needs to look at to create one of those benefit guides. And so, how can you take that 10 hours of manual creation and use AI to bring that down to let's say an hour? We're solving that problem. We're actively in development on that. I can't wait to bring out to our subscribers to show them what we can do.

DG: So a little tease there, a little something coming. Stay tuned for the first episode of next season, sounds like. That's awesome. Anything else in the pipeline that you can mention or feel comfortable mentioning?

EV: Yes, there's so much on our roadmap and so many things that we're working on, but it's really important for us to prioritize based on what our subscribers are asking for. That is one of them, but there's a couple others that are on the burners right now.

DG: Okay, great. Well, listen, Erik, I've really enjoyed the time today. It's been super informative. We're looking forward to you and I and our companies having further discussions for sure, but if listeners that are out there are curious to learn more or to get started with you, what's their best first step? How can they reach out to you?

EV: Yep, go to brokerproai.com, and there's a way to request an invitation, and we would love to talk with you.

DG: Okay, that's is there before we end is there anything else you'd like to talk about or mention before we wrap up today?

EV: It's just, it's been an honor to be able to talk with you and to get this opportunity and we know that now being by brokers for brokers we're talking to those that are in the same boat they're looking for these solutions and it's tough it's tough to read through it so let us show you how we're different and how we're close to the problems that you need to solve.

DG: Great Erik, thanks so much for joining me today in StudioOne. I appreciate it.

EV: Thank you.

DG: And everyone out there, thanks for tuning in to our latest episode produced by StudioOne. If you enjoyed what you heard, please share this episode and consider subscribing. For more insights like this, visit us at RanchoMesa.com and subscribe to our weekly newsletter. Till next time, take care, bye-bye.

CA Insurance Commissioner Lara Approves 8.7% Workers Compensation Increase

Rancho Mesa’s Alyssa Burley and President David Garcia discuss California's approved 8.7% workers' compensation insurance rate increase, its impact on businesses, and practical steps business owners can take to prepare for the changes effective September 1st.

Alyssa Burley: You're listening to Rancho Mesa’s StudioOne™ podcast, where each week we break down complex insurance and safety topics to help your business thrive. I'm your host, Alyssa Burley, and I'm joined by Dave Garcia, president with Rancho Mesa. And we're going to talk about California's now approved workers' compensation insurance rate increase. Dave, welcome to the show.

Dave Garcia: Thanks, Alyssa, glad to be back here in StudioOne and anxious to get this information out there for everybody.

AB: Yeah. So we've actually been talking about the proposed workers' compensation increase for, I don't know, the last few months. And we've published multiple articles and podcast episodes on the subject, and now it's actually official. California's Insurance Commissioner, Ricardo Lara, has approved an 8.7% average rate increase.

So Dave, in your opinion, what kind of impact will this increase have on California businesses?

DG: Well, you know, this is a deep, deep topic. So I'll try to be brief right now. So in short, you know, we've obviously been talking a lot about this recently, and particularly about what's driving these increases. But rather than go over all those elements again, I'd encourage the audience to listen to the three-part series I did recently with Margaret Hartman. She's the Senior Vice President and Chief Marketing Officer for Berkshire Hathaway Homestate Companies. They're one of the largest specialty work comp carriers in California and Margaret gave just tremendous insightful overviews of what's at the heart of this and the increases range from medical cost inflation, payroll inflation, and cumulative trauma claims just to name a few of the many cost drivers.

So to fix those, we're definitely going to need reform, but as with anything else, to address those bigger problems that are going to require that type of reform, I just don't see that coming until 2027 at the earliest. Maybe election year 2026, puts a little upward pressure there, but I'm not going to bank on anything happening before 2027.

So with Laura's decision, the WCIRB just recently released their new pure premium rates per class code, which we take the opportunity then to download that into our pricing models here at Rancho Mesa. So that gives us an ability to identify the individual impacts these new pure premium rates will have on each class code.

AB: Okay, and we'll include links to those three episodes with Margaret in the episode notes for this episode. And I would encourage our listeners to reach out and see if this increase or how this increase is going to impact your individual class code.

Now, when can California business owners expect to feel the result of this increase?

DG: That's a great question, Alyssa. So this all goes into effect September the first of this year. So these pricing changes will take effect on that day. But the thing that business owners should understand is that those changes will not take effect for them until the actual renewal time of their workers' compensation policy.

AB: All right. So businesses with a renewal date on or after September 1st will feel this change. While someone who renews, let's say in February, won't feel this impact until February 2026, correct?

DG: Yeah, exactly. You’re spot on there. And that's why I think we've tried to kind of be the canary in the mine here by publishing so many articles and podcasts months ago to try to get this message out because, so many of the businesses that--so for those business that renew really close to September they have some opportunity to get prepared the time is short.

AB: All right so there are things business owners can do to prepare even if they renew early September, maybe October?

DG: Yes, there's ways to prepare now and that's whether your renewal is in September or some month after September. But let me just stress this, time is of the essence. There is no time to delay. So the closer you are to September 1st in your renewal, you really have no time to spare.

So along those lines, we've got solutions here that we think will help all businesses. So we're going to be taping an episode here in the next few days that will spell out exactly what businesses can do now to try to mitigate these increases. The good news is we have the answers and on top of that we're more than willing to roll up our sleeves and get to work.

AB: If you're talking to your client today we know the time is over the essence what are you telling them?

DG: You know I'm telling them that the first thing they need to do is understand what the actual individual increase is to them and their pure premium rates. So they need to reach out to the broker, hopefully they're aware of what those changes are, and find out is it a single digit, double digit, high double digit increase, it's going to really make a big difference.

The second thing they really need to do is kind of roll up their sleeves and have somebody audit their safety program.

And then thirdly, I think it's time to really mine into your claims and try to develop solutions to the root causes of those claims. Without those three things, the wave's going to hit you and you're not going to see it coming.

So we all need to just encourage one another, now's the time to be proactive. And this is work that is able to be done. This is not overwhelming work. It's a matter of being proactive, understanding the situation, and then implementing a strategy and moving forward.

So businesses that are out there, reach out to your broker, reach out to us, talk to somebody now, don't wait.

AB: All right, and I look forward to discussing all of those ways California businesses can prepare now for the coming increases. So Dave, thank you for joining me in StudioOne.

DG: Alyssa, thank you so much, an audience out there. Really, time is of the essence. So make those calls.

AB: All right. Well, thanks for tuning in to our latest episode produced by StudioOne. If you enjoyed what you heard, please share this episode and subscribe. For more insights like this, visit us at RanchoMesa.com and subscribe to our weekly newsletter.

Workers' Comp Rate Increases On the Way with Margaret Hartmann: Part 3

In the final episode of a three-part series, President David Garcia and Margaret Hartmann, Sr. VP and Chief Marketing Officer with BHHC, discuss the WCIRB's proposed 11.2% workers’ compensation rate increase in California. They explore how this may impact employers, and actionable steps businesses can take to mitigate rising premiums.

Dave Garcia: Hi, you're listening to Rancho Mesa's StudioOne™ podcast where each week we break down complex insurance and safety topics to help your businesses thrive. I'm your host, Dave Garcia. Thanks for joining us.

So today with the WCIRB's recent announcement of 11.2% recommended rate increase in workers' compensation, it definitely feels to me like the workers' compensation marketplace in California is about to change, and with that in mind, we've invited Margaret Hartman, the Senior

Vice President/Chief Marketing Officer at Berkshire Hathaway Home State Companies, who's one of the largest specialty workers' compensation carriers in California, to give us some insights as to how this recommendation came about, what are the areas that are driving this increase, and what employers can do to try and mitigate the rate increases.

Hi Margaret, welcome back to StudioOne. Thanks for joining me today.

Margaret Hartman: Thanks for having me.

DG: It seems to me Margaret, given all the data and recent recommendations that many employers have not all are going to experience rate increases on the renewals. You know, we know Commissioner Lara--generally speaking--the Bureau makes their recommendation which they have at 11.2. Commissioner Lara--usually in June so it could be any day now-- will make his recommendation.

MH: I think it's today. There's a hearing today. He may not decide today, but I know there's a hearing today.

DG: Okay, well it could be today and today, so the we're taping this it's June the 10th. You know, I don't have a crystal ball. My crystal ball has snow in it I think he's going to come in with a recommendation of somewhere between four and six percent increase or somewhere in that range, six to seven, I don't know. Regardless, it's going to be a recommended increase, which we have not seen in over a decade in workers' compensation. So while that means it's going to put upward pressure on rate, that doesn't mean every single policyholder in California will see the same rate increase as another.

So your experience modifications come into play, your claims experience is going to come into play, and most importantly too, your safety practices. And this is where we're really auditing that and then allowing your broker to present that to the marketplace and what you're doing to prevent injuries from occurring and then what you do once an injury occurs. I think that is the really, really critical right now and Margaret, what actions would you recommend they try to do, if they see an increase to try to mitigate the increase and in some cases maybe there's still a decrease out there?

MH: Sure. And I mean, we've talked a lot about some specific ways that employers can help themselves out. But really, that experience modification that you're talking about is the best way to manage your insurance premium. So as you mentioned, there's going to be probably some sort of rate increase and probably single-digit, I'd imagine. And I agree with you four to six, three to five, something like that, but you're experiencing it. So that's, the carrier will have a base rate increase, increase likely, but your net rate is not going to be the same as that base rate. And the only way to impact that is to have a low mod. So try to manage your experience mod as much as you can.

And again, that's all the things we talked about, having the safest work environment that you can so you can prevent accidents from happening and then partnering with a carrier that's focused on providing the best possible care, getting claims resolved quickly and efficiently.

DG: Yeah, and we know, as Margaret said, it’s your premiums can be predicated on your payrolls by class code, multiplied by the final rate from the carrier, multiplied by your experience modification. But to get to the final rate of the carrier, there is some subjectivity still available with the carriers. So they can deviate a certain percentage, usually it's plus or minus 50%, off of their base rate. But in order to warrant those credits, it's going to take real items to try to get the carrier to understand why they should apply those credits. So when we talk about that out there, what your broker does is he or she submits to a carrier your information. We call that a submission.

So Margaret, how important is receiving a complete submission early in the process of benefit to the policyholder in getting the best possible rates?

MH: Yeah, I think it's incredibly important. So an underwriter is going to be getting a lot of these

applications, right, they're coming to their desk. And the ones that are complete, where they don't have to call or send an email or ask questions or try to get more information, those are going to rise to the top of the stack and they'll be able to process them quickly and maybe get the quotation out, right?

And then that starts the process of negotiation or tweaking that price. So the earlier that you can do that, the better. I think it definitely helps. And then the more complete the information is, you know, that will help the underwriter better price the risk as well.

DG: Yeah, are there any parts of submission that, you know, they're all important, but does any part of it carry more weight for your underwriting team than another area?

MH: Yeah, I mean, I think we look at the account as a whole, but obviously, loss history. It goes a lot into how we view an account, how we price an account. You know, a lot of times there's a supplemental application and employers out there have checked the box. "Oh, yeah, I have a safety program," blah, blah, blah.

But sometimes it becomes a check the box versus a, you know, "What exactly are you really doing?" But the proofs and the pudding, what does the loss history look like?

We also pay a lot of attention to payroll too. Is the account growing and if there's substantial growth in the payroll versus the expiring year, what's going on is there going to be growth and if there's going to be growth, it's not to say we would dislike the account, but that's one where we may want to keep an eye on them. how are they going to manage hiring practices to bring on all these new people? What kind of projects are they going to be taking on? It just goes into us understanding what that risk is isn't understanding how to price it.

Likewise, if the payroll's dropping substantially, why is that happening? Is there a layoff spending, those kinds of things? And then we look at the risk quality, risk management, safety program. Those are harder to get our arms around because as I said, a lot of people will just kind of check the box. Yeah, we have these things. So a narrative is really important from the broker, kind of putting together the story of the account.

The loss history, none of these things are the only, they're only a little piece of the puzzle, right? So maybe the loss history is such that it looks really bad and then in the last two years, it's improved. If you can substantiate why it's improved, not just send, here's the loss runs and here's the application, but this employer really took some steps to improve their loss profile. You know, they hired a new risk manager, they automated a lot of their procedures. Those are things that are going to play into the price and you're going to go, well, I think that account is going to perform the way it has the last two years, not what happened in the past. And they may still have a really high mod because of past poor losses. So it can help kind of paint the picture of what's going on with the account today.

DG: I think that's great you know what it sounds to me and it's high time it's time for everybody go to work, you know the broker needs to go to work and not just check boxes needs to provide more information. I know we regularly dig deep into those things if payrolls are going up maybe it's just payroll inflation maybe there's no new employees everybody just got pay raises or now they're doing union work versus not. Like you need to know more than just the basic facts. And I love the summaries, you know, we're a big proponent of that. But I think I'm always three dimensional, always seems to be the best. And so I know we've worked in the past Margaret, when we get looking at a new potential client of ours, we put all the all the paperwork together, the summaries, the losses, the payrolls, all those things, but it's still paper.

And what I think I like, you know, how we work with you is we'll say, "Hey, can we go out and do a joint call together so you can actually ask the questions and see the operations?"

Do you think having the carrier go out prior to quoting the business is a benefit to the business?

MH: Yeah, absolutely it is. And we love to go out and see the prospects. There's nothing like meeting somebody face-to-face, looking them in the eye and seeing the operation as well. And on the other hand too, they have an opportunity to meet us and see their service team and what they’re going to get from us. You know, policy, especially in the workers’ comp, you know, they all kind of cover the same thing, there’s not really a lot changes besides maybe a deductible. So it's really the service that's important. And so I think it's good for an employer to actually meet their service team and see who's going to be working with them in the future. Yeah, I mean, absolutely. We love to do that. We're always open to having our folks go out and meet with prospects face to face.

And now with virtual too, a lot of times we will do them virtually. It's easier and you can do them quickly. You can get them set up quickly.

DG: I'm sure you can do more than two or three in a day if you need to.

MH: Right, so either way. We're happy to have those meetings. And it does make an impact.

DG: So employers, I would encourage you, you're working with your broker currently to engage with them early. And when we say early, you're probably talking 120 days outside of your renewal date. So you want to get this process started early, particularly with the changes that are occurring. And then as a team, you guys decide should we involve some carrier interviews where we get an opportunity to talk to the carriers, and you can talk to more than one. You know, if you just want to get a comparison like who did you like better? They both offer great services and things like that. So it is going to, it's time to roll up our sleeves and you know really get to work here. There's some tremendously great work comp carriers--Berkshire Hathaway heading the

List--that are out there. So I would just encourage you to you know to go out and work with your broker partner and make sure that they're doing the job that they're supposed to be doing too.

So Margaret you know I appreciate your time today before we wrap up is there anything else you'd like to share with our audience.

MH: Gosh, no, I mean, I think we've covered a lot today. And again, I think our mission is really to provide, you know, the best possible care for injured workers, because at the end of the day, you know, that's what's going to result in the best claims costs more effective for employers. And it's the right thing to do. And keeping employees safe is the right thing to do, not just for, you know, an employer's business, but just because, you know, we care about people.

DG: Yep. And you've demonstrated that, you know, time and time again. So I think everybody out there, you know, there's been a lot of things that we've discussed today. If you're looking for more information, you know, reach out to myself or to Margaret directly, you know, you can go to our site, RanchoMesa.com.

And we're happy to help, you don't have to be our client, we're in this together. So Margaret, listen, I can't thank you enough for joining me today in StudioOne and kind of sharing your insights to this changing worker compensation marketplace. Last, anything else? How's Notre Dame football going to be this year? What do you think? What's your prediction?

MH: Oh boy, I don't know. Don't throw that curve at me. I have no idea, but I'm still looking forward to the season.

DG: Okay, there you go. All right. Well, listen, thank you all for joining me today in StudioOne. If you found this information useful, you can subscribe to our podcast channel, which is StudioOne, all one word, and it can be found on literally all the podcast applications. So thank you again for your time. Goodbye for now.

Workers' Comp Rate Increases On the Way with Margaret Hartmann: Part 2

In the second episode of a three-part series, President David Garcia continues his discussion with Margaret Hartmann, Sr. VP and Chief Marketing Officer with BHHC, and explains how companies can mitigate cumulative trauma claims in light of the WCIRB’s recent 11.2% recommended rate increase.

David Garcia: Hi, you're listening to Rancho Mesa's Studio One podcast, where each week we break down complex insurance and safety topics to help your businesses thrive. I'm your host, Dave Garcia, thanks for joining us.

So today, with the WCARB's recent announcement of a 11.2% recommended rate increase in workers' compensation, it definitely feels to me like the workers' compensation marketplace in California is about to change and with that in mind, we've invited Margaret Hartman, the Senior Vice President, Chief Marketing Officer at Berkshire, Hathaway Homestate Companies, which's one of the largest specialty workers' compensation carriers in California, to give us some insights as to how this recommendation came about, what are the areas that are driving this increase and what employers can do to try and mitigate the rate increases.

Hi Margaret, welcome back to Studio One. Thanks for joining me today.

Margaret Hartman: Thanks for having me.

DG: I know that Berkshire Hathaway, we've worked with you guys for any number of years. We have a tremendously strong relationship so I'm very familiar with a lot of the services that you're able to provide policy holders, but are you guys looking at taking any targeted steps to help manage this growing impact of CT claims as a company?

MH: Yeah, I'm glad you asked. We are taking this very seriously and we have taken some proactive steps here, including you know we have a task force a little committee that we’ve set up internally within our claims teams to try and manage some of these claims and have strategies for, you know, we want to make sure that we make decisions on these quickly, ones that are legitimate that we’re getting people treated quickly and though the system so that we can get them back to health and back to work as quickly as possible.

DG: You know, that's a really, really smart idea. I know you guys did the same thing during COVID, when you started to see COVID claims, you kind of bunched those into a unit because the repetitiveness of the type of claim led to expertise in managing the claim.

MH: Right.

DG: Yeah. That's a, that's, that's awesome. I'm glad to hear you're doing that.

MH: Yeah, so we've, you know, we've improved our tracking, like our CT tracking approach implemented some analytics on that so we can dig deeper on some of the doctors that we're seeing, some of the players in the CT space. We ramped up our training around the compensability decisions involved, more managers in the process. We've just, we've made a lot of targeted changes, including using data analytics again and identifying the players in that CT space. And then we really kind of launched a collaborative approach on how we're managing these claims. So along with our claims professionals and consolidating cases with specific claims professionals, we also have specialty teams that are pretty unique, including our medical excellence team, which is headed by our medical director, Dr. Lynn, who's an occupational health specialist. So she's developed some strategies for helping us deal with these. We have a roundtable approach that we've now implemented for some of these CT claims.

We also have a contribution team which is kind of unique as well. So, as I mentioned, a lot of these, since they happen over a span of time, it often, you know, somebody may work for multiple employers and we want to make sure that our policyholders are only paying for their fair share of those claims. So we have a contribution teams that helps us manage those third party recoveries and get those dollars back if somebody else is responsible for a portion of those claims. We also have in-house council and a very robust special investigation unit, for when we do start to see some of those like mass layoff type filings of CT claims, we'll get our special investigations unit involved in those as well.

DG: Is that unit also involved with I guess the slang word would be capping you know by attorneys?

MH: Yes.

DG: Can you explain what capping is and maybe how that hurts the system if you're the employer or the insurance carrier?

MH: Right well there's been several really, really high profile cases of capping here in California where people are actually going out and trying to that people to come in and get medical treatment, signing them up, say you have a claim and we'll send you in to see these doctors. I mean, to the point where some of them are really egregious, like people were having surgeries that they didn't need just so that they could get paid and then they're getting paid for that. So our special investigation unit is very involved in those types of cases. Those are, of course, very, very extreme cases, but we want to make sure that they're involved. And so when we start spotting some of these trends and behaviors and things, we will definitely bring them into the loop. And they work with the local district attorney's offices. A lot of them have very good relationships with the DA's offices so that we can move some of these cases forward and make sure that there's no abuse there. And then, you know, all of that is kind of what we're doing after the fact. But probably the most important thing, and I'm going to talk about this again when we talk about what employers can do, is getting loss control involved early on. I think our loss control specialists are very well versed in trying to identify these possible CT exposures that may occur in the workplace. And we may not be able to eliminate them all, but we can reduce the risk often.

DG: Well that's great. So let's switch gears now and start talking about what would you recommend employers do to try to mitigate this risk.

MH: Well prevention starts at the workplace level of course so one of the most effective things employers can do is foster early reporting, open communication, many CT claims stem from issues that were never reported or addressed early If somebody is having problems with their wrists, for example, because they're doing, you know, repetitive typing, we can get an ergonomic eval and get somebody out there to help prevent that injury from progressing because now we're going to have the right equipment in place for them to be able to do the job safer. And often some of these modifications are not expensive to do.

DG: And that ergonomic evaluation is something that your loss control department can assist with?

MH: They can assist with it. We also have a kind of a do -it -yourself app. Okay. You know, there's a lot of them out there. I mean, the nice thing for employers right now is that there are so many safety resources before you had to go through some library and now you can kind of Google YouTube videos and get them from anywhere.

DG: Right.

MH: So I'd say, you know, stay informed, stay engaged in what kind of preventative measures are out there. And then just stay tuned into what's going on with your workforce as well. Strong return to work programs also can help with that as well. I want to highlight another thing that, you know, we have nurse triage that's available for employers. So nurse triage programs where the injury gets reported to a nurse and they help to triage that injury, get them to the right medical provider network doctor and get people in appropriate treatment right away. That can also really help with early reporting.

Also, that these nurses take a pretty detailed medical history. So that can really go a long way to in helping like set the groundwork for the defense of a claim. If say the specific injury you talked about, sometimes a specific injury, then turns into a CT, then turns into multiple body parts, we'll have a detailed and recorded statement from the nurse with a medical history of the injured worker. So a lot of times we can use that to help defend against that spread. Now, you know, it was a risk, but now it's an elbow and a shoulder and a neck.

DG: Yeah, you know, big, big proponent of nurse triage. I just think it's you guys implemented that now I don't know several years ago and in just with our clients that utilize it we've seen a significant decrease in claims kind of growing arms and legs because it's make that phone call at the initial time the injury occurs. This is of course assuming a non -life -threatening type of injury. It's recorded as you said it's a very thorough, you know, evaluation by a nurse on the other end, but it is recorded. And then the nurses then report the claim into your claims department. So there's really hardly any lag time in reporting the claim. And then it gives your claims people an opportunity to get it from the jump. I just think that's a, if you're an employer out there and you're not asking your current carriers, if they have this availability you may consider moving to a carrier, like a Berkshire Hathaway, that does provide this service because it comes to you at no cost. Berkshire absorbs this cost and it's just a way of you know treating your employees better. They feel like you really care because you're getting immediate assistance right away. You know it also eliminates the drive time between wherever the injury occurred and whatever facility you're taking them to be seen. If it's not an urgent situation then they're just sitting in an urgent care waiting room and it's not very productive. So you know we've seen that the claim handled better and we've seen productivity have less of an impact negatively for our clients that use it. So I think nurse triage is really something that everybody should be using regularly.

MH: Yeah, I Agreed.

DG: What other things Margaret?

MH: Again, I'm going to highlight loss control, you know, loss control specialists can help develop a plan to address some of the CT exposures that that may occur in the workplace. Some wellness programs and I know you guys implemented that mobility stretch program for landscapers. That is also very helpful if somebody's already, you know, stretched and they're loose and it can help prevent injuries. And if they're doing that consistently, it can also help prevent a CT claim.

DG: Yeah, yeah, thanks for bringing that up. We did, you know, we worked closely with your team to identify, you know, what is the predominant type of injury a landscaper might have. We found it to be lower back. It looked for the root cause of what it's what were they doing in those situations. Then identified a stretching program that helped mitigate that when they were going to be doing whatever that procedure in the work day entailed. And you know, I think when we do that, whether it's a broker, the carrier, the combination of the broker and the carrier, and then the employer, the worker feels like they matter, that somebody actually cares about them.

And you know, most people, that's all they're really looking for. It's like I want to provide a living for my family. I want to go to a work environment that I feel safe, that I feel valued. And so we're going to switch just a little bit about culture too. Do you find culture, you know, being a part of this that an employer can, you know, I mean, there's so many things, aging workforce.

So let's hold off on culture. Talk to me about aging workforce. I'm in that category. I'm 67 years

old. I was hoping to skip it, but we really need to talk about it. So is there any plan, you know, that you think an employer can do for handling the aging workforce like me?

MH: Well, again, I just think it has to be acknowledged and addressed. So, you know, Bureau of Labor Statistics is saying employees age 65 or older has grown 117 % in the last 20 years. So people are just staying in the workforce-

MH: -A lot longer. And, you know, I think employers just need to be cognizant of that and that there may be work modifications that can and should be done to accommodate some of these workers just to keep them also protected.

DG: Yeah.

MH: Often we will see CT claims and it's kind of the retirement claim after a prolonged, you know, like 10 year of doing heavy lifting, right? If it is some of these workers, you know, they're great employees. And that's why people keep them on and they want to continue to contribute. And I think that there are some ways that you can strategize on keeping them safe. So and I, I'm going to highlight loss control and reaching out to them or some of some guidance on some of those plans. And then, if there is going to be a pending layoff, there's some things that can be done in advance to prepare as well. So again, I think the partnership between employer and carrier, just open communication and knowing what's going on early on, we can help. We can't eliminate all of the exposure, but we can help mitigate some of it.

DG: Yeah, we get asked this question a lot prior to a layoff or even just during the regular work week is it helpful to have anybody acknowledge sign something saying I don't presently have an injury you know so they're going to be laid off and then you say great are you know you're okay yes would you mind acknowledging that is that just a pipe dream or is that something that maybe an employer should think about doing does it help at all if they have that document?

MH: I think it certainly can help and I think that there's you know the other side will argue well then are you putting it in their mind that you know now they've had a claim. I think there's ways to ask those questions that are you know are still legitimate we don't want to certainly be you know sneaky in the way we're asking it but we do want We do want to ask, is there anything we could do to make the workplace safer? How do you feel about the things that we have in place to keep you safe? Maybe having some of those questions. There are some ways that I think it does help if you can set that groundwork early on. Again, you might not be able to completely defend any of these cases, but it can just be one more thing. Look, we do ask how people feel at the end of their shifts, how people feel about our ability to keep them safe, and there was no issues at all until six months post layoff, and now all of a sudden we're getting this litigation. But all along they were saying that everything was okay. So I think it can help, and again, it's about really developing the right strategy and talking to our loss control professionals about how to go about doing that. That kind of tees up culture in a way, you know, the empathy, the care, all of those types of things. So, do you think that the culture of an organization can really impact the number of CT claims a business might have?

MH: I think it's probably the best way to impact the number of CT claims. You know, some of the things you were saying earlier about employees feeling heard and valued and safe, you know, physically and emotionally, you know, culture plays this huge role because those employees are likely to report issues early. And they're also not likely to litigate because they feel angry or disenfranchised or because they've been treated unfairly. So I think it's probably the most impactful thing that you can do is to have that really good culture. And on the other hand, we see environments where morale is very low and the culture's not good. And employees will find a way to retaliate on that. So it's often we'll see like a group of CT claims and they'll all be in one department or one unit or one team or reporting to one supervisor.

So those issues about leadership in your organization, you know, have to be addressed. And so yes, I think culture isn't just like a nice to have, it's actually a risk management tool.

DG: Yeah, and it's, you know, it's not to the point where you have to say, you know, the inmates are running the asylum kind of thing, it's like, no, but you know, it's the golden rule, right? Treat others that you'd like to be treated. So I think if you're, you know, seeing things or observing things that you don't feel are right, you need to do something to correct it. And I think that feedback to ask those questions like, is there anything else we could do or can be doing to make your job better, safer, more productive, things like that. It's an overused term, culture, you know, like what does that really mean? But boy, I'll tell you, I'm sure you've seen this, when you walk into certain businesses, within five minutes, you can see that on the good or bad culture scale, you're like, this is an energy company, these people are engaged, these people are happy to be here, they're working well, and you can walk into a company like, I don't think anybody wants to be here. It seems very punitive or something.

So I think it's a really good measure for us. And maybe another transition point here is to say, hey, do you think it's now time, given the changes that we see coming in the marketplace, that employers should really fully audit their safety plans, their cultures, and be looking for areas to improve it? Do you think that would be step one for a lot of companies out there right now?

MH: 100%. I mean, it's a best practice anyway to be constantly looking and evaluating and enhancing your safety program. But now with what we're seeing in the market and appending rate increase, it's really actually critical. And I think what you said about, you know, culture to wrap that up, you know, you can tell and a company has a really good safety culture. And if you want to help improve it, again, I'm going to make a pitch for loss control and our loss control especially, they do a lot of training on safety culture, train the trainers, training managers and lead people to do that. Because those are the key people within the organization. You know, you might say it at the top, but if it's not happening at the management level, it's probably not happening, and they have a lot of ideas. One of the strategies, as an example, that was mentioned to me was we had an employer that they had one of their lead people that was a very long-term employee that was bilingual. They have Spanish-speaking workforce, and he volunteered as part of his leadership responsibilities to be accountable for the work comp claims. If there was a work comp claim, he was kind of the go-to that they could come and ask questions on what to do, who to go to, how to report. And having that be somebody that was actually out there that was a worker on the floor made a huge impact with that company where they were having a problem with late reporting. So, that's just one little example of what an employer might do.

DG: Yeah, and there's, you know, a company safety program, it's like an octopus. It has a lot of different arms to it. You could be looking for root causes of injuries, what safety trainings are you providing to attend any workshops. If you have a claim or you engage, as you mentioned earlier, with a return to work program, are you reporting the claims timely? How are you investigating the claims you're looking for, hey an injury occurred, we should do an accident investigation and then use that as a training with other employees So that we don't have that reoccurrence of that issue because we've now trained for it benchmarking themselves against industry peers. How am I doing against other landscapers or whoever it happens to be I probably any one of those things you can spend a lot of time on but you need to tackle them You know those are all things and there's the list can kind of go on and on. Are there any one in particular that stands out to you? Or is that just-

MH: Well, you know, I'd say all of the above I mean I think everything you mentioned is really important and helping to manage claims costs and have a good safety culture and you know as I said before safety resources are readily available everywhere yeah and even if you don't you If you're a small employer and you say, "Well, I don't have a loss control consultant that's coming out," I mean, almost all carriers have safety centers, websites, and all sorts of tools and resources that can help keep employees safe.

And we haven't talked yet about return to work programs. And with indemnity payments on the rise, and I recently saw a study by another large multi-line carrier, but they write a lot of work with composition here in California, and they were noticing that disability days are very much on the rise. So it's important to get employees back to work as quickly as possible. And some employers don't have the ability to modify jobs, so there's no modified work available.

We have a transitional work program so we can get people back to work at local nonprofits. It gets employees back to some kind of modified duty, feeling like they're doing something to add value and help get them back on the path to recovery. So I would encourage a return to work program for all employers, especially given that we're seeing those increases and wages are continuing to go up too. So temporary disabilities tied to state average weekly wage, so we've seen some pretty big increases the past couple of years.

DG: Yeah, and you know, we've been big proponents of that and utilized your resources, whether it's, as you mentioned, kind of the re-employability side of your business where you do put them out into nonprofits or your other program, Shakley, which actually sends the work to their house.

MH: Right.

DG: So they don't even have to leave their house if that was the need. And we've just seen tremendous improvement in returning them back to their customary job.

And it also, just for employers out there, if you’re able to continue any of the wage during that period of time, any portion of it, it comes off of that temporary disability benefit so, your wages that you’re going to pay that person this work does not accumulate to go towards your experience modification. So, only the actual temporary disability payment that the carrier is making on behalf of you go into that calculation. So, you know, for our clients, they're very aware of that, they understand, you know, how many dollars of claim value is equal to one point of claim, and they realize, well, if I just pay this person X, I've reduced my experience modification by one, three, five points. So, there's just a lot of benefit to doing it. So I would definitely encourage you to take a look at that. Make sure that your place in your business with a carrier like Berkshire Hathaway that offers those tools.

Margaret, listen, I can't thank you enough for joining me today in StudioOne and kind of sharing your insights to this changing worker compensation marketplace. And thank you all for joining me today in StudioOne. If you found this information useful, you can subscribe to our podcast channel, which is StudioOne, all one word, and it can be found on literally all the podcast applications. So thank you again for your time. Goodbye for now.

Workers' Comp Rate Increases On the Way with Margaret Hartmann: Part 1

In the first episode of a three-part series, President David Garcia sits down with Margaret Hartmann, Sr. VP and Chief Marketing Officer with BHHC, to explain the outcome of WCIRB’s recent 11.2% recommended rate increase, and offer insight on what areas are driving this increase.

David Garcia: Hi, you're listening to Rancho Mesa's StudioOne™ podcast, where each week we break down complex insurance and safety topics to help your businesses thrive. I'm your host, Dave Garcia. Thanks for joining us.

So today, with the WCIRB's recent announcement of 11.2 % recommended rate increase in workers' compensation, it definitely feels to me like the workers' compensation marketplace in California is about to change. And with that in mind, we've invited Margaret Hartman, the Senior Vice President, Chief Marketing Officer, Berkshire Hathaway Home State Companies, who's one of the largest specialty workers' compensation carriers in California, to give us some insights as to how this recommendation came about, what are the areas that are driving this increase, and what employers can do to try and mitigate the rate increases. Hi, Margaret. Welcome back to Studio One. Thanks for joining me today.

Margaret Hartman: Thanks for having me.

DG: All right. Well, let's just roll up our sleeves and jump into this thing. So starting with the 11.2 rate increase being the recommendation by the Bureau, and the root causes driving it, aside from cumulative trauma claims, which we definitely will talk about today, what are the other areas that are driving this recommended increase?

MH: Okay, well, I think first we have to start with medical cost inflation, which we thought we would see a couple of years ago, and I think really because we've had very good fee schedules here in California, the impact of medical inflation was delayed a little bit. We are now starting to see significant growth in paid medical services per claim in 2024, attributed to a recent growth in the number of medical transactions per claim and a continued increase in paid per transaction.

So one of the other things that happened a couple of years ago is they redid the fee schedule for medical legal services and we've seen increases for medical legal services per claim also with an increase of 15% in 2024. So those numbers are now starting to hit and they're really pretty big numbers.

DG: Yeah, so when you talk about medical cost inflation, that's something I think our audience is probably well aware of just in their own health insurance costs. I mean, what we're talking about here is you go to the doctor for some procedure, it's going to be more expensive today than it was five years ago, simply because of inflation in the medical arena. Is that kind of what we're talking about?

MH: Absolutely.

DG: Yeah. So that eventually is going to trickle into the premium, the losses and all of those things for when we consider workers' compensation, it's going to pull into that arena as well. So that's it. That's a cost driver, an increase that has to be accounted for.

MH: Absolutely.

DG: Yeah.

MH: The fee schedules have now caught up with medical inflation.

DG: Yeah. What else is driving this Margaret?

MH: So we've also seen a slight increase in indemnity payments of about 3%, which is driving indemnity claim and just an indemnity claim is really a lost time claim, a claim that it's not just a need for medical but also disability payments.

DG: Right. So you're going to be away from work.

MH: Right. So the projected severity on indemnity claims for 2024 was 6% higher than in 2023. And the average severity in 2024 is the highest it's been in more than a decade. So we, so we talked a lot about the workers' compensation market and how great the Senate Bill 863 reforms that happened several years ago were on the industry. Well, now we're starting to see that some of those increases creep back in. And so we're seeing indemnity claim frequency also on top of the severity. So it's kind of a double whammy.

DG: Yeah, so more serious claims and more often.

MH: More often.

Yeah, okay.

MH: Now, interestingly, this is what we're going to talk a little bit about, start to talk about CT claims. There was a lot of volatility obviously in frequency during the pandemic years, but then we started to see claims frequency start to tick up and really the sharp increase in the frequency of claims really involves these cumulative trauma or continuous trauma claims that we're going to talk about here in a minute. That started really in 2022 and has continued through the beginning of this year as well. So if you take those claims out of the system, there's a slight actually decline in frequency. So those are really what's driving claims frequency here in California.

DG: Okay. So CT claims is the major driver for this cost increases. So you mentioned it, but before we jump into the topic, just for the audience, how do you define Cumulous Trauma, a CT claim? What is that?

MH: Okay. Yeah, I'm happy to describe what that is.

DG: Give it a shot.

MH: I'm also going to tell you, though, that one last thing on the increases, because these continuous trauma claims are typically litigated, there’s also been a big increase in loss adjustment expenses and we saw a 10 % jump in 2024. So a lot of that 11.2 % increase is driven by these negative trends, including this big impact on continuous trauma. So now I'm going to delve into what is this and you may hear the term cumulative trauma, continuous trauma, RMI, of motion injury, repetitive stress injuries.

The thing that's in comment about these claims is they occur gradually over time. So it's not a specific incident that causes it, but it's a gradual onset. And they result from repetitive stress or continuous exposure or chronic overuse of a body part during work activities. So to give you a couple of examples of repetitive stress injuries is carpal tunnel syndrome, which happens of the risks from repetitive typing. You can have back pain from chronic heavy lifting or bending and stooping.

Hearing loss is another form of continuous trauma from prolonged exposure to loud machinery. You have respiratory claims from prolonged exposure to chemicals.

So those are just some examples of what a continuous trauma claim is.

DG: And that doesn't seem, I mean, obviously some of this could be industry specific. I think about the construction industry, as you know, we focus quite heavily on that. We see a lot of these types of claims from what you were talking about, the lifting, just the year over year over year of doing that manual work. But it's not limited just to construction, right? You're seeing these CT claims across the board, whether it's an office exposure, a manufacturer, hospitality, construction, doesn't really matter, is that?

MH: Absolutely.

DG: Okay. What do you, in your view, what have these CT claims met to the overall performance of workers' compensation claims in California? How big of an impact have they really had?

MH: Well, in talking about the numbers that went into that recommended increase, I mean, CT claims have had a pretty significant impact on our overall system. They're also, interestingly, kind of California -specific. We write workers' compensation, of course, in all states. And we really see this phenomenon here in California. They are typically litigated. 70 % of the continuous trauma claims that we see are litigated, which results in longer claim duration. So they're open longer, they're going to stay on an employer's experience mod longer. So there's a lot of challenges in trying to get these claims resolved. It's typically not a quick resolution. Often there's other carriers involved since they happen a prolonged period of time. They limit it to a year, but there could be two or more different employers that are involved in these claims. So, they can be rather complicated. And then, you know, applicants, attorneys here in California have been very aggressive about using social media and a lot of advertising to kind of get the word out and sometimes even kind of convince workers that the aging process itself is part of their continuous trauma.

And then the other interesting thing that's happened with CT claims recently is they were really, really prevalent in Southern California. So it's kind of started in the LA Basin and expanded throughout Southern Cal. But, you know, there was often talk about there was it was a tale of two states. Southern California had all these issues with CT claims. We didn't see them in the North. Now we're starting to see them. Since 2022, big increases in Northern California and the Central Valley as well.

One of the theories behind why that's happening, which I think makes a lot of sense, is that with the pandemic, a lot of things pivoted, a lot of these legal proceedings now have pivoted to virtual, so they don't have to go to the board to prove the case. The attorneys now can have clients all over the state, it doesn't really matter, and then handle depots and hearings virtually, so it's made it a lot easier for them to get clients that are outside of their area. So we've seen these claims really balloon and expand.

DG: So, that's kind of like you said that's a residual of the COVID years right that's what it had to be enacted and that's just continued.

MH: Right.

DG: Yeah so you know I'm already thinking of some solutions here but let's power forward here a little bit further. So are there any ways potential reform changes in the laws that you can see that might help tune this around?

MH: Well, you know, absolutely, there's opportunities for reform. For one, just tightening the standards around how CT claims are filed and accepted could help. The threshold in California is vague and really leaves the door open for some questionable claims.

Today, really, an introvert only has to prove 1% of work causation cause their disability. So they could have all sorts of pre -existing conditions, but if the work environment contributed even just very slightly like the 1%, that CT claim would be accepted. So you may get some apportionment on permanent disability, but you still, the employer would be responsible for the medical treatment and the temporary disability for that claim. So tightening up some of those thresholds years and years ago in California, we were seeing the same thing. It was just a flurry of mental health psychological claims and with the same threshold and they actually changed the threshold. So now for a pure site claim where there's no other specific incident, post -traumatic stress type situation, that's involved, it's a continuous trauma type of cycling, the work has to be the predominant cause of that. So it's like it's more of a 51% threshold. So maybe doing something like that.

DG: So I mean, that makes total sense to me, of course. What would it take to get something like that done? Why isn't that happening right now?

MH: Yeah, I think the biggest problem is that, you know, it's California right now is having problems with property insurance with a wildfire situation that we have here, auto insurance, there's just not been a focus on workers comp. Workers comp rates have just continued to decline for the past several years, so there hasn't really been any big efforts to make any changes there.

Now that we're seeing rates start increasing, we may see some reform. The California Workers Comp Institute is saying maybe in 2026, I think it's probably going to take a little bit longer than that before, you know, we see any types of changes. I think one of the other things that could be addressed to is really how post termination claims are handled because, you know, we still continue to see these post termination layoff claims where, you know, the insured has a layoff and then we see multiple claims filed often with the same attorney, same types of pleadings.

DG: So, on those post termination claims, is there any timeframe, post termination that they have to file the claim? Is it a year for that as well?

MH: It's not. So, a post term specific injury, there is a statute of limitations of a year, but not for a post-term continuous trauma because if the employee doesn't know that they're injured, they can't report the claim. And since the CT happens over time, the threshold is when you knew or should have known that you had a disability and an injury and so you have to have proof that they went to a doctor and someone told them they were injured and that kind of thing.

DG: So that leaves that door pretty wide open.

MH: Exactly.

DG: And just for the audience, we will get to some solutions that you can do as an employer to maybe try to mitigate some of these things. So what we really are trying to do is let's just get the issues on the table, try to really understand them, and then let's go about trying to put some fixes in place that in your companies that you might be able to do to try to help this situation. We're not going to be able to let it, we're not going to get it to go away until there's more reform. And as Margaret said earlier, that's going to take some time. But I think it's all employer groups, unions, associations, things like that. Now is the time to start to put some focus on, putting some pressure on Sacramento to try to get these things higher on the list and not let it just sit behind the wildfires and the other issues we have in California.

MH: Sure. And I want to add too that we don't want to take legitimate benefits away from somebody who's injured, but we have seen a lot of abuse with these types of claims and that's what we need to get out of the system.

DG: Yeah. I just, I mean, we can talk about the frustration and, you now, the accounts that we manage and work with and, you know, you just see where body parts become separate claims, you know, so it's a CT claim, first it's a shoulder, then a week later it's an ankle, then it becomes a back, an arm, you know, so these are just multiple claims then, which have individual costs, which again really impact the EMR's experience, lots of things like that.

Margaret, listen, I can't thank you enough for joining me today in StudioOne and kind of sharing your insights to this changing worker compensation marketplace.

And thank you all for joining me today in Studio One. If you found this information useful, you can subscribe to our podcast channel, which is StudioOne, all one word, and it can be found on literally all the podcast applications. So thank you again for your time. Goodbye for now.

Trends Shaping the 2025 Insurance Marketplace and What’s on the Horizon for Rancho Mesa

As we enter the New Year, Rancho Mesa's Alyssa Burley sat down with President Dave Garcia to review 2024. In the episode, Dave shares insight on the state of the commercial insurance marketplace, reflects on Rancho Mesa’s accomplishments, and discusses what’s to come in 2025.

Alyssa Burley: You’re listening to Rancho Mesa’s StudioOne™ podcast, where each week we break down complex insurance and safety topics to help your business thrive.

I’m your host, Alyssa Burley, and today I’m joined by Dave Garcia, President of Rancho Mesa, and we’re going to discuss the state of the insurance marketplace and a little bit about what’s new at Rancho Mesa.

Dave, welcome to the show.

Dave Garcia: Good morning, Alyssa. I'm excited to be back in StudioOne™.

AB: Well we're happy that you're here.

Now, in a few days, Greg Garcia and I are doing an episode where we’ll discuss the auto and workers’ compensation marketplace specifically for the landscape and tree care industries. But, I want to get your take on the state of the commercial insurance marketplace as a whole.

So with regards to the typical commercial lines like property, auto, general liability and excess, are you forecasting the hardening marketing to continue and if so, what can business owners do to mitigate the market trends?

DG: Yeah, you know, Alyssa, one of the principles that we operate on here is that we're just going to tell the truth and not just tell the audience or people what they want to hear. So the truth really is that the insurance marketplace is continuing to remain hard, and it doesn't seem like any time in the foreseeable future we're going to see any real decline in that. So I think it's important that we get together and really strategize on what are some of the things businesses can do to try to mitigate this, because I would say across the lines, property auto, general liability, and then excess coverage, the arrows are all still indicating upward movement.

AB: All right. So what do you think the workers' compensation market will do in 2025?

DG: So we track the WCRB, the Workers' Compensation Insurance Rating Bureau. They publish some information quarterly that gives some really good insightful market trends. And this last quarter, we noticed for the first time in 15 years that the average cost of workers' compensation in California has risen. And it's a composite rate, so it's taken all the premium and it's taken all the all the rates and blending them as if they're one. And for the first time it showed an increase. And this is something that I think I've been anticipating.

I'm fortunate to sit on a couple of National Workers' Compensation Carrier Councils and kind of being behind the curtain with them, seeing some of the trends coming, it's coming to fruition now. So I do feel like the Workers' Compensation Market is going to show signs of hardening, but not dramatically like the other lines have done. So it looks like the average increases in the two to three percent range, which most businesses could absorb.

And what that means is that there's still going to be some rate decreases for certain businesses, but those that are not really managing their safety program well, their experience modifications are trending upward, they could see significant rate increases. So it's time to really start to address those issues.

AB: So what are some of the things that people can do to help mitigate this?

DG: Yeah, so I think it's a time, and we would always encourage this ongoing, is really to take a look at your safety programs and try to tighten them up in any areas where maybe there's some insufficiencies. And you may be listening and saying, “Well, I'm not really sure. I think mine's pretty strong. Where do I begin?”

And I would start with working with your insurance consultant, your broker, and the carriers that you're with and asking them what are the areas that they feel like you could use some help. We do a number of things here that we would encourage different people to take a look at and have access to. So for us, we do 60 or so different workshops throughout the year, directed specifically to areas in all lines of insurance that are causing problems relative to workers' compensation.

I think it's time to really evaluate both the services that you receive from your broker as well as the services that you can be receiving from the insurance carrier. It's very varied. The common denominator that many people choose to make decisions on is a simply price and not value. And I think in most people's personal lives, they value value over price sometimes. And that's not to say that the more expensive it is, the better it is. That's not always the case, but to true value to your dollar. So it could be the same price, but the value is just much greater.

So I would look at looking at evaluating, having your broker ask the questions about services the carrier can provide in workers' compensation, like do they offer nurse triage? Do they have any re-employability programs? Do they actually produce a medical cost containment report? What are loss control services like? Are there any loss sensitive options? Things like that, where if you're not aware of those things, you're probably not accessing those things, and that's going to drive up claim costs. And the whole goal is to lower claim costs, because that's what will protect you as the market starts to rise. So ask your broker about accident year loss ratios of carriers. If they're unfamiliar with that term, call us and we'll explain the differences.

But that's a trend that we're seeing that's rising. That is more of an actual number. And for the last four years, the carrier's accident year combined ratios are above 100%. And what that means is currently they're at 107. So that means for every dollar in premium they're collecting, they're paying out $1.07 in costs, and any business understands that's not going to be sustainable. And the only way to correct that is to lower costs or increase revenue, which in the carrier's case is premium. So I think it's time to really roll up your sleeves, get your broker to roll up their sleeves, and get to work and see if you can't help mitigate some of these exposures.

AB: Yeah, absolutely. And I appreciate you explaining all of that and where you see the market changing in 2025. So let's talk about Rancho Mesa and what everyone can expect in 2025.

DG: Wow, my favorite subject other than my family.

AB: You get to talk about us.

DG: Yeah, exactly. So don't ask me about my family because we'd be talking for like two days. But Rancho Mesa is my second family and I'm super excited really to just be a part of us. We just had a fantastic year. It was just unbelievable. Really strong results, tremendous growth. We're looking to add the right people, more people, but the right people. I'm just super excited about some of the other services that we're being able to bring to our clients. Our Safety One platform, so that's our online safety platform, as well as our safety app that we use for our clients in their fields. Both of those have been added tremendous more capabilities this year. We're really excited about that and we're looking forward to seeing, you know, where it goes from here. So those are the kinds of things that just, I'm excited to see what 2025 holds for us.

AB: Yeah, and I'm glad you brought up Safety One. We've added functionality and streamlined processes over the last 12 months, and I know that we'll continue to onboard more and more clients, and it's only going to get better and better.

DG: Yeah, and I think that's just a great tool. You know, we use that tool in several different ways. One way it's certainly going to improve the safety programs of the clients that use it, there's no question about that. But what it also does when we go to negotiate their terms in the marketplace, we point to the tools that they're using, the trainings that they've completed, we have all that at our fingertips now. And it's our job really to negotiate in our client's behalf, but we need substance. We don't need cotton candy. We need substance that we can take to the carrier and fight for those scheduled credits to keep these costs down. So SafetyOne™ and the SafetyOne™ app are just huge components of us being able to do that.

AB: Yeah, absolutely. So what else do you want to share with our listeners?

DG: Well, let me tell you, we had to delay this podcast a little bit today because exciting news, we're growing, as I mentioned earlier, and we're taking on more space here in the building. So we're now going to take over the remainder of the floor and that contract was just signed a week or so ago and the construction, the demolition of that space has started. And as I said, we had to stop the podcast for a minute while they were hammering away in there. So we're going to add about an additional 5,500 square feet or put us real close to 20,000. So I'm super excited about that, not because of the numbers, but because what it means and the capabilities that that extra space and more people are going to be able to allow us to offer to our clients moving forward. So just keep looking for updates, we're going to be posting pictures as the progress of the new space develops. And then we'll probably have a second open house when we can show it off a little bit. So that's really exciting.

The other thing that I'm looking forward to doing is kind of a kooky idea, of course, it came from me, so it's a really kooky idea. But I'd like to introduce a new podcast series next year called Dave's Dugout. And so, you listen to different radio shows or you watch a sports show on TV and right before the commercial they give you that little teaser like, "So you got to stick around so you can hear what this is all about." So I'm not going to really tell you much about Dave's Dugout today. Just understand that it's going to be something I'm really excited about and we will be producing a short Dave's Dugout podcast introduction shortly that you'll be able to tune into and get an idea of what I'm talking about there. But trust me, it's going to be a lot of fun. And I think it'll be an area where I'll certainly learn and grow from, and maybe some of the audience will do the same. So super pumped about that.

AB: Yeah, I can't wait to hear that.

DG: Yeah, I know. It's like the present under the tree that hasn't been unwrapped yet. And hopefully it's the one that everybody's excited about, not the one that goes out to the curb the day after Christmas, because it's not a present anybody wants.

AB: Well, something that I do want to mention that I'm kind of proud of this last year is about six months ago, we introduced our OneofOne™ recognition program within Rancho Mesa. And essentially what that does is it allows coworkers to acknowledge the work that their teammates are doing in the office when they go above and beyond. We have QR codes scattered throughout the office where people can scan that code. They can, you and acknowledge different people, write up a little scenario, what the situation was. And then we get to post it. We get to shoot it out on teams to everybody in the company so that they can know what their coworkers are doing and how they're supporting each other. And I think we're at like 70% in the last six months of our employees have been recognized. And those are just the people that we've documented, you know that there's a lot more people behind the scenes that are, you know, going above and beyond just helping out their co-workers. So I think that that's something that's pretty cool and not everybody does that.

DG: No, I'm really with you and behind you 100% on that. I thought it was a great idea. And the great thing about it is we're not good here at participation trophies or employee of the month where you just kind of rotate it around because, you know, who hasn't wanted this month. This is really coming from the people. And it could be the same person, it doesn't, you can be repetitive. And what it's really begun to highlight is, I'm finding out things that people are doing at different areas of the company that, unless they just happen to be walking by and talking to them that moment, I wouldn't know. And now it gets pushed out. And what I really see it doing is it's encouraging other people to try to create those OneofOne™ moments. And as the audience probably knows, we actually trademarked that word. We made OneofOne™ all one word because that's really what we're culturally trying to accomplish; provide OneofOne™ interactions between co-workers and clients and friends and vendors and different people. So to see it come to life like that has been super exciting. So I'm looking forward to seeing how many more we get in 2025 for sure.

AB: Yeah, I'm looking forward to it as well and all the exciting things that we'll be doing. Dave, thank you for joining me in StudioOne™.

DG: Yeah, me too. So Alyssa, thank you for having me today here in StudioOne™ I'm super excited about 2024 but I'm really optimistic and excited to see what 2025 has to offer. So thank you for having me in StudioOne™ today.

Actual Impact of Auto Claims to Your Bottom Line?

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

In two previous articles/podcasts, we explored “below the surface” impacts from payroll inflation and lost time workers’ compensation claims. We provided detail on how these can negatively impact a business’s productivity and profitability and what companies can do to mitigate those impacts. Today, let’s look at another area where you need a keen awareness to really understand all the impacts.

What is the true impact an auto accident can have on areas of your business? For discussion, let’s consider an accident where your driver is at fault and also injured. This type of accident is much like an octopus in that it is going to touch many areas of your insurance program. 

• First, there is the damage to your auto, obviously this will be covered under the physical damage portion of your policy.

• Second, you will have the physical damage and potential bodily injury to the third party whom your driver hit. This would fall under the auto liability portion of your policy. Additionally, if the other party or parties are severely injured it could penetrate your initial layer of liability insurance requiring your umbrella/excess policy to respond. As a side note, in my 35 years in the insurance industry, the largest claims that we see are predominately in auto due to the potential of severe bodily injury.

• Third, given that your driver was injured, this claim will trigger your workers compensation policy to provide coverage for both the indemnity and medical costs of their injuries.

• Fourth, the claims will impact your loss ratios in both your automobile insurance and workers compensation, causing the potential for future premium increases.

• Fifth, this claim will also cause your Experience Modification to rise, which again will cause the potential for future premium increases as well as potentially, if you’re a contractor, eliminate you from bidding on certain work.

• Sixth, replacing the injured driver may mean having to hire someone new which will increase payroll and lead to additional training time and a loss of productivity.

I’m sure your head is spinning and you’re probably wondering “all this, from one accident?” What should I do? Thankfully there are several things you can do to mitigate this before the accident occurs. Consider the following:

• Do you have a formal fleet safety program in place? If not, work with your trusted advisor to get one in place. If you would like us to help you with that contact our client services team to set up a time to review our trainings and fleet safety resources with you.

• Do you have a distracted driving policy in place for your drivers? This is by far the leading cause of auto accidents and while many are at low speeds, they can still be very costly. High speed distracted driving accidents can be catastrophic.

• Are you participating in the DMV Pull Program? If not, this is a valuable tool that will provide you with information on your drivers’ experience regardless if the infraction or incident occurred as a part of work or outside of work. Most auto insurance carriers will view this as a subjective credit on your premium rating. You can do this very inexpensively and direct via the DMV website.

• Are you using any telematics tools, like GPS, speed and breaking tracking, cameras (both forward facing and rear facing)? These devices are again viewed as a subjective credit by insurance carriers.

• Once an accident occurs, are you completing a thorough accident investigation report with a description of the accident, witness statements, pictures, police report (if available) and then reviewing the data to determine root cause and possible changes to your fleet safety program?

As you’ve seen, the key to mitigating this type of claim is to keep it from occurring, which is easier said than done.  Accidents will still happen. While you may not be the “at fault’ party in many of the accidents, reducing the likelihood of your driver being at fault starts with your commitment to a strong fleet safety program. If you need help in creating this fleet safety program, please contact our client services team to get started. 

Once you have a strong program in place and you feel more in control of your vehicle safety performance there are other cost saving programs that you would be eligible to consider.  We discussed those in other articles where we explore Performance Based Insurance Programs.

I hope you find this information useful and that you are able to take away an idea or two that might improve your operations. To learn more best practice techniques, contact us or reach out to me directly at dgarcia@ranchomesa.com.

Is Now the Time for a Performance-Based Insurance Program?

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

In the three preceding articles in this series, we took a deep dive into some areas where a business’s productivity and profitability could be impacted by various factors emerging in the insurance marketplace. In the course of those articles, we also examined some tools, strategies and ideas that a company might implement to help manage and mitigate those impacts. Today, we will look at a way to exert the most control over your insurance program and premium outcome through performance-based insurance programs.

I’ve written about these programs before in "Increasing Your Productivity and Profitability Through Your Insurance Program," "What is the True Cost of a Lost Time Workers’ Compensation Claim?" and "How is Payroll Inflation Impacting Your Workers' Compensation Premium." So, in lieu of diving into all of them, let’s review a few of them briefly and then spend a little more time with “are they right for you now?”

Beyond guaranteed cost programs, where policyholders pay a set premium and then claims are covered up to the policy limit, there are a wide range of performance-based insurance programs that can apply to a single line of coverage, like workers’ compensation, or multiple lines of coverage that can also include most notably general liability and automobile. Rancho Mesa has created a Workers’ Compensation Continuum document that lists many of these programs. As you move from right to left on the continuum, business owners increase control as well as risk. So, a wise strategy would be to evaluate as many programs as seem to fit your tolerance and readiness for that additional exposure.

Are you confused, yet? You are not alone, which is why it is even more important to start the process with a trusted advisor (your insurance broker) who is both familiar with and skilled in putting these programs in place. A properly skilled and educated advisor will be able to walk you through each option and present it in a way that makes your understanding of it easy to comprehend. If you do not fully understand both the benefits and the risk, we recommend pausing before moving forward, and take ample time for the best decision possible.

As someone who owns and operates a business, I like the idea of the “bet on yourself” model which always makes me feel more in control of the outcome. I cannot emphasize enough how confident you need to be in the ability to control your claims in order for these programs to work for you. That is why in the previous three articles, we talked so much about what you can do to improve your safety programs and more importantly your safety culture. Once you have the right team in place, have reached the point where you have control of your claims, and want more control over your premiums and pricing, then it may to time to move into the performance-based insurance program world.

If my forecast of a hardening workers’ compensation market as early as late 2022 or early 2023 is accurate, then getting started now in putting the right team together should be a priority. Follow these three steps to prepare:

1. Review your existing safety programs.

   a. Look for ways to improve them based on loss trends and industry benchmarks.

2. Evaluate your claims history over the last five years.

   a. Look for the root causes that are driving the losses.

3. Identify someone internally to be your safety director.

   a. Consistently demonstrate upper management’s support of their efforts to the company and make sure you provide them with tools necessary to accomplish their goals.

Finally, in closing, choose a trusted insurance advisor who understands your industry, your operations and is very familiar with performance-based programs. There are good trusted advisors out there, so if you are currently with one, then give them the time they need to help you get better. 

If you want to learn more about performance-based programs and would like to talk with us about the opportunity to be your trusted advisor, contact us and our team that specializes in your industry will reach out to you. If you would like to speak with me directly, email me at dgarcia@ranchomesa.com.

I hope you found this series helpful in making your 2022 the most productive, profitable and safe year ever.

How is Payroll Inflation Impacting Your Workers' Compensation Premium?

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

Inflation is rampant everywhere, from consumer goods like groceries and gasoline to increased housing costs and labor. Today, I want to talk with you about the specific impact that payroll inflation is having on the workers’ compensation marketplace and ultimately on your premium cost.

Any and all businesses have felt the impact of increased payrolls both to retain existing employees and also to attract new ones. For the sake of discussion, let’s use an inflation wage percentage of 6.5%.

On the surface, this 6.5% wage increase is hard enough to manage on profit and loss statements, but below the surface there is also a deeper impact on businesses that for many will catch them unaware.

The two areas I want to talk about are:

• The impact the wage increase has on temporary disability claim amounts.

• The financial impact that higher wages will have on workers’ compensation carrier P&L’s.

First, temporary disability claim amounts are generally equal to 2/3 of the average weekly earnings of the injured employee. This payment does have a minimum and maximum amount, but for our discussion we will assume the injured worker falls somewhere in between.

So, if the injured worker’s average weekly wage increases by the 6.5%, the disability payment will follow suit. This 6.5% will have several negative impacts. The higher cost of the claim will have a negative impact to the business’ Experience Modification Rate (EMR). 

This can be significant to a business since it will not only directly affect the future year’s premium but if the business is a contractor, an elevated EMR can potentially limit pre-qualification approval from many builders. 

This is so critical to a business success that here at Rancho Mesa we developed a proprietary Key Performance Indicator (KPI) Dashboard that has the capability to tell our clients the actual claim amount per point of experience modification so they can plan accordingly.

An additional consequence of the claim costs increasing is that a company’s individual loss ratio (claim amounts/premium) with their workers’ compensation carrier will increase. Suffice to say as the loss ratio increases, future premiums will need to increase to offset those higher claim costs. Ideally, to continue to receive the most aggressive pricing, we like to see our clients’ loss ratios stay below 30% so these potential inflation increases need to be understood and addressed proactively.

Shifting gears, let’s look at the impact of payroll inflation on the insurance carrier as a business and what impacts it may have on you the business owner as well.

One of the measurements workers’ compensation carriers look to and monitor for their financial health and well-being is their combined ratio. As a general rule, combined ratios measure dollars collected in premium divided by claims costs and overhead. A good combined ratio indicating a profitable and strong company would be in the low 90%’s.

So, logically speaking, if a carrier is experiencing an increase in temporary disability claims costs and an internal payroll inflation of the same 6.5%, which direction will their combined ratios be going? Obviously, it will be going up, so what are they to do?  The most likely choice would be to raise premiums to help offset those increases – unfortunately we know who pays those premium increases.

Now that we understand the impacts that payroll inflation will have on workers’ compensation, what can you do as a business to help mitigate them. The answers are easier than you might think.

This first step is to help reduce the likelihood of claims occurring, thereby reducing the impact of the increase to temporary disability claims on your company.

• Conduct a thorough review of your current safety program and look for ways to improve it. How often are you meeting? Are the trainings current and specific to your needs? Is there a tracking system in place where these trainings are documented? At Rancho Mesa, our Client Services Group works closely with our client teams, drawing from our library of over 3,000 specific trainings to help you create meaningful trainings specific to your needs.

Should a claim occur, what are the steps to help mitigate the impact:

• Report the claim timely – the quicker your insurance carrier is aware of the claim the better the claim outcome.

• Select a carrier that offers “nurse triage” so that in addition to reporting the claim quickly you are able to have an assessment of the injury without going to a clinic and potentially reducing the need for a lost time claim.

• If you have implemented all of the above but still have a lost time claim, offer modified work to meet the injuries work restrictions. By offering modified duty, you are able to either pay the injured workers whole salary or a portion of it which eliminates the temporary disability cost from the claim and/or will dramatically reduce the cost. In addition to these claim cost savings, statistics will show when modified duty is offered the potential for litigation is reduced saving even further potential costs.

To create an active and sustainable safety program, look to your trusted advisor (insurance broker) and see what services they have that can assist you. 

• Do they have a client services team that can provide industry specific trainings, workshops, webinars, certification programs to take your safety program to the next level?

• Are you having regular claims meetings with them to review performance, spot trends, look for root causes?

• What tools are there to assist you in reviewing your claim data?

• Are they able to provide industry benchmarking? 

• Do they have an in-house workers’ compensation claims advocate to assist you with your open claims to create a better outcome?

Payroll inflation is now a reality and not likely to subside any time soon. As we have shared though, there are proactive steps all businesses can take to help mitigate the impact on your workers’ compensation program today and in the future.

If you are looking for assistance in managing through this or have any additional questions, please reach out to us or email me at dgarcia@ranchomesa.com.

Be informed, be proactive, and implement a plan to make your 2022 the best year ever.

What is the True Cost of a Lost Time Workers’ Compensation Claim?

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

There are many insurance professionals that have tried to quantify the real cost of indemnity or lost time claims, using multipliers anywhere from 2 to 4 times the claim amount in an effort to determine what the real cost of a claim will be to a company.  While this may be true, it remains subjective to many. Let me help you understand the ways this type of claim will impact you and then you can decide the real impact to your business.

Let’s assume a claim where the injured worker will be out for 2 to 3 months and the claim’s total incurred amount (which is the combination of paid dollars and reserves) is $50,000. This claim can and will impact your business.

The first direct hit will be your experience modification (X-Mod). While a claim in your current term is delayed a year before going into the calculation, you’ll feel the effects of the remaining 3 years. So, assume the claim is in your 2022-2023 policy year, claims from that year will not go into your 2023-24 policy year but will be in the next three policy terms, 2024-2025, 2025-2026 and 2026-2027. 

Each company develops their own “primary threshold,” a term used to describe the maximum incurred loss or cap that any one claim can impact the experience modification.  It’s confusing to many policyholders, but this amount regularly changes year-to-year for most companies, as it is derived by the Workers’ Compensation Insurance Rating Bureau (WCIRB) based on the payrolls and class codes a particular business uses and reports. 

To simplify this for our clients, we developed a proprietary Key Performance Indicator (KPI) Dashboard that calculates client’s individual Primary Threshold, also detailing how many points to the X-Mod it would add giving them a true indication as to the cost of the claim as it pertains to the X-Mod. Request a personalized KPI for your company.

Now that we understand the impact to the X-Mod, what other areas will be impacted? The next most obvious is the workers compensation carrier’s loss ratio.  Adding claim dollars will negatively skew percentages and undoubtedly cause an increase in premium of some amount at renewal.

While the impact to the X-Mod and loss ratio are easy to understand, they are really just the tip of the iceberg. Let’s go below the surface and look at other ways this claim will impact your business.

Losing an employee for any length of time is impactful, but losing the employee for a month or two would likely require the business to fill that person’s job and responsibilities within the company.  In many cases this means trying to hire someone new to the organization. 

Without going into great detail, the business is likely going to experience additional payroll and benefit costs, training, and likely a decrease in expertise which will most certainly impact the productivity of that particular job. 

I think we can all now understand how a lost time claim affects the X-Mod, loss ratio, and a business’s productivity and profitability, both immediately and into the future. 

So, what can I do to avoid this or at least minimize the impact should a lost time injury occur?  The great news is that in many instances you can prevent these injuries from ever happening or at least reduce the frequency of them occurring.  Start with these strategies and enlist your insurance broker for their guidance in the process:

• Perform a complete overview of your safety program.

• Make changes in training that address your specific needs.

• Increase awareness and accountability of those employees responsible for the implementation of your safety program – consider adding this as an area of their annual performance appraisal.

• Identify new employees so that your experienced people can mentor them in training or in watching how they are performing. Statistics show that new employees (defined as less than 6 months) have the highest percentage of injuries. New hires in construction can wear different colored hard hats, gloves, vests or even a sticker on their clothing, anything that might let the crew leader know who might need a little more oversight.

• Choose the right workers compensation carrier. In general, look for a carrier that offers in-house claims handling, loss control services, can show you statistically both their performance in closing claims vs. the industry, claim costs vs. the industry, medical cost containment performance, length of time doing business in the state you are in. These are just a few items to consider that can result in the best claim outcome should one occur.

• Choose the right insurance advisor (broker). Are they a specialist within your industry? What client services do they offer pertaining to trainings you need? Do they offer workshops, webinars and safety certifications? Do they have an experienced workers compensation claim advocate in house to assist you in both understanding your claims and mitigating costs? What tools do they have to help you benchmark yourself against your industry? Can they help you identify trends and root causes?

We’ve seen how one lost time claim can have a negative rippling affect for your company in both your productivity and your profitability.  It may feel overwhelming in how to understand and fix your issues with all the other areas of your business that you have to be involved with.  It really doesn’t have to be, it’s just time to look at who you choose to work with from your carrier to your broker differently. 

Contact us via our website or reach out to me directly at dgarcia@ranchomesa.com.

Increasing Your Productivity and Profitability Through Your Insurance Program

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

“What?” You’re probably asking yourself; “Did I read that wrong? How can my insurance program improve the productivity and profitably of my company?” Trust me, I understand your confusion. 

I’ve been working in the insurance industry for 35 years and this is a premise I heard about, but thought was impossible, until I dug a little deeper. Once I did, I was able to share this concept with my clients over the years and it changed how they approached this vital part of their businesses.

I have examined four current insurance issues facing you and your companies, and share the steps needed to make this premise a reality. To do this I will inspect each issue in some depth and help you build a foundation of understanding so that you can begin to increase your productively and profitability through your insurance program.

I will be covering the following topics:

• “What is the True Cost of a Lost Time Workers’ Compensation Claim?”

• “How Payroll Inflation is Impacting Your Workers Compensation Premium?”

• “Is Now the Time for a Performance-Based Insurance Program?”

• “Actual Impact of Auto Claims on Bottom Line”

I hope you find this information as a pathway to improve both your productivity and profitability in 2022. 

The Field Guide to Navigating Your Insurance in 2022

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

As a business owner preparing for 2022, what areas of insurable risk should cause you the biggest concerns?

During the 2021 year, we experienced a hardening insurance market. All lines of insurance were negatively impacted as a result of the catastrophic events we experienced such as wildfires, flooding, hurricanes, and the emergence of COVID-19. Large national and worldwide crises like these caused underwriting losses in the billions of dollars to both front line insurers and reinsurers. 

COVID-19’s impacts included:

• The loss of income/revenues

• Labor shortages

• Health concerns

• Relocation of labor forces

As the year comes to a close, we now have some answers but even more questions about what challenges 2022 will bring. Below are a few remaining questions that create uncertainty.

• Will Property, Auto, General Liability, Excess, Cyber, and EPL insurance continue to see pressure? The short answer is yes.

• What can I do today as a business owner to prepare and better mitigate these increases?

  • Start your renewal process a minimum of 120 days away from your expiration date. Learn more about the pre-renewal process in our article, “3 Reasons Your Pre-Renewal Meeting is Key to your Success.”

  • Be willing to meet and discuss your particular situation, needs and goals.

  • Choose a broker that specializes in your industry and can negotiate with the marketplace from a position of expertise.

  • Evaluate the services that you receive from your broker’s agency to assure they align with your specific risk management needs. Are they proactive or reactive?

Where is the Workers’ Compensation Industry Going in 2022 and Beyond?

What is expected of Workers’ Compensation in 2022? The short answer is that this market will remain soft.

The Workers’ Compensation Insurance Rating Bureau (WCIRB) has asked for a modest decrease in overall rates and most carriers’ filings have reflected that recommendation. However, these are averages and many industries will find these decreases harder to come by.

What is expected of Workers’ Compensation in 2023? There are several leading indicators that present early signs of a hardening market.  Here are a few:

• Wage inflation for most businesses. This will lead to higher temporary disability payments to injured workers thus increases in overall claim amounts.

• Wage inflations within insurance carrier’s personnel. This will cause a rise in their overhead costs and then a subsequent rise in their combined ratios which will impact their bottom line.

• The likely inclusion (September 2022 and beyond) of COVID claims in the Experience Modifier Rating formula (X-Mod). While this is not yet official, approval appears likely.

Preparing for the hard workers’ compensation market starts today with our checklist.

We will explore those at length in a series of articles beginning in January 2022. Subscribe to our newsletter to receive those articles. For now, here are a few tips:

• Utilizes a Workers’ Compensation Gap Analysis and Opportunity Assessment (through the Risk Management Center).

• Benchmark your performance to industry standards to look for areas of improvement. Learn more about Rancho Mesa’s KPI.

• Choose your workers’ compensation carrier wisely. Learn more about selecting a carrier in the article, “How to Choose a Workers’ Compensation Carrier Partner.”

• Have you ever considered performance-based programs? If not, maybe it’s time to bet on yourself. Watch the “Deductible Workers’ Compensation: Understanding performance-based insurance programs” webinar.

With workers’ compensation premiums representing a significant line item on many profit and loss statements, staying up to date on the rapidly changing environment should be a priority for all businesses. And, preparing for the expected rate increases is more important than ever with inflationary costs already choking profitability for so many operations. Our series of articles starting in January will help in this education process and allow you to better understand steps you can take now to weather this building storm.

Incorporating a clear strategy as it relates to your insurance portfolio is perhaps more critical than ever leading into 2022. With pricing increases across all lines of coverage becoming more and more common, managing this line item on your financials should be a proactive process with your broker. Start that dialogue now and develop the right plan to design and coordinate the most comprehensive and competitive program possible.

Performance-Based Workers’ Compensation Programs – Are Retros In Your Future?

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

In the past, we explored performance based workers’ compensation programs. These plans can create a competitive advantage and an opportunity to monetize your company’s insurance program.   

While we have previously discussed several of these programs in detail (i.e., captives and deductibles), another option that is often overlooked; Retrospective Rating Plan (retros), could possibly be the right next step for many businesses to explore.

Typically, these plans begin to make sense once a company’s annualized premiums exceed $500,000. They contain many elements and variables that must be analyzed and understood before inception, including:

• maximum, basic, and minimum premiums

• required letters of credit (LOC)

• loss cost factor (LCF)

• losses based on incurred or paid

• potential return of premium

• number and frequency of recalculation of the premium/losses

• recapture of premium in future calculation if claims develop

• claim buyouts

Are you a candidate for a performance based program? 

Example of a Retro Workers’ Compensation Program
Assumes a $500,000 premium with a 30% incurred loss ratio

If you would like us to create a performance model for you and your team members to evaluate, contact Rancho Mesa at (619) 937-0164 or via our website. Or, complete our performance based insurance spreadsheet and submit to Alyssa Burley at aburley@ranchomesa.com 

How to Choose a Workers’ Compensation Carrier Partner

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

Many years ago, when I was a young producer, one workers’ compensation carrier legend pulled me aside and told me never to forget that a workers’ compensation decision is not a one-year decision, but at least a 4-year decision. Of course, policies are only written on a one-year basis but what he was teaching me was that the carrier you choose will handle all the claims you have through your Experience Modification cycle. So, evaluating and recommending a workers’ compensation partner for my clients just became a much more thorough analysis of many critical factors beyond just the premium.

I understand and want to acknowledge that competitive pricing is very important, yet other than price, most business owners are not sure what to look for when comparing carriers. All businesses should consider the following in their evaluation of a workers’ compensation carrier:

• What is the A.M. Best rating of the carrier?

• How long have they been in the State workers’ compensation marketplace?

• What is their premium volume within the State?

• What “in-house” services does the carrier provide? Two services for special consideration are:

  • The Claims Department

  • Loss Control Service

• How does their medical cost containment numbers compare to the industry averages?

• How does their claim closing rates compare to the industry average?

• Are the following services available?

  • Telemedicine

  • Nurse Triage

For any businesses that pay above $250,000 in annual premium, should consider these additional questions:

• Does the carrier offer a dedicated indemnity claims examiner for your business?

• Does the carrier offer Claim Review Meetings?

• Does the carrier offer a Client Services coordinator?

• Does the carrier offer on-line claim status information?

• What loss sensitive programs do they offer?

Further, for any businesses that are exploring loss sensitive programs (usually above $400,000 in annual premium) like deductible workers’ compensation, they should evaluate the following:

• What are the terms of the letter of credit required?

• Is there a Loss Conversion Factor (LCF)?

• Is a Loss Fund required?

• How are Allocated Loss Adjustment Expenses (ALAE) handled?

• Is there a policy deductible aggregate?

• Are there any claims handling charges?

• Are there Medical Cost Containment charges?

Since many of the concepts and terms above require a deeper understanding and explanation, listen to my podcast episodes where I examine this topic in greater detail.

Also, consider attending one or both of my live webinars that cover this topic and afford you the opportunity to ask questions. Register for our Thursday April 1, 2021 webinar where I will focus on businesses with annual premiums below $400,000, and/or register for my Thursday April 8, 2021, webinar where I will deal specifically with deductible workers’ compensation. Both webinars will be 30 minutes in length.

If you would prefer to speak with me directly, I can be reached at (619) 937-0170 or email me at dgarcia@ranchomesa.com. 

I wish you all a safe and profitable 2021.

SB 1159 Is Now Workers’ Compensation Law

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

As expected, California Governor Newsom signed Senate Bill 1159 (SB 1159) into law Thursday, September 17, 2020 and it will have several impacts on workers’ compensation and the presumption of the claim. Below is an outline of some of the more important elements of SB 1159. In simple terms, just remember three numbers, 4/4/14 - I’ll explain, later. Additionally, these rules will continue, unless modified, until January 2023. So, SB 1159 may be around for a while.

If an “outbreak” occurs, for the presumption of the claim to rest with the employer (meaning it will be presumed the person testing positive for COVID-19 contracted it at work and is therefore eligible for workers’ compensation benefits), there are several factors that need to be meet for that to occur.

If the employer has fewer than 100 employees and 4 employees test positive, or if the employer has more than 100 employees and 4% of their total employees test positive, during a 14-day period at an employer’s specific location, the COVID-19 case is presumed to be work-related. Thus, the 4/4/14 rule. When in doubt, call your workers’ compensation carrier and discuss the specific situation. They will help you determine whether or not it is a workers’ compensation claim. 

Rob Darby, President of Berkshire Hathaway Homestate Companies, the second largest writer of workers’ compensation insurance in California and I discuss SB 1159 in a recent StudioOne™ Safety and Risk Management Network podcast episode “SB 1159 Impacts Workers' Comp Market.” A week before Governor Newsom signed the bill, Rob and I discussed the impacts of the bill to get an early insight. Take a listen - I think you will find it useful.

Now comes possible confusion with SB 1159. What is considered an outbreak? What is the definition of a specific location?

Outbreaks

The section of the law (Labor Code 3212.88) applies to any employee other than frontline workers and healthcare workers who test positive during an “outbreak” at the employer’s place of business, if the employer has 5 or more employees.

COVID-19 is presumed work-related if an employee worked at the employer’s place of business at the employer’s direction on or after July 6, 2020 and both the following elements are met:

• The employee tested positive for COVID-19 within 14 days after working at the employer’s location.

• The positive test occurred during an “outbreak” at the employer’s specific location.

An “outbreak” is defined as a COVID-19 occurrence at a specific employment location within a 14-day period AND meets one of the following:

• If an employer has 100 employees or less at a specific location and 4 or more employees test positive for COVID-19;

• If an employer has more than 100 employees at a specific location and 4% of the employees test positive for COVID-19;

• The local public health department, State California Department of Public Health or Occupational Safety and Health Administration (Cal/OSHA) or school superintendent orders the specific place of employment to close due to risk of COVID-19 infection.

A specific location or place of employment is a building, store, facility or agricultural field where an employee performs work at the employer’s direction. An employee’s home is not considered a specific place of employment unless the employee provides home health care services to a client at the employee’s home. An employee may have more than one specific place of employment, if they worked in multiple locations within the 14-day period before their positive test.

There is a 45-day timeframe to determine if a positive COVID-19 case meets the above standard.

Outbreak Reporting Requirements

When an employer knows or reasonably should know that an employee has tested positive for COVID-19, they must report the incident to their workers’ compensation carrier.  They should be prepared with the following information to give the carrier.

• The fact that an employee has tested positive, regardless if work-related or not.

• Employers should not include any personal information regarding the employee who tested positive for COVID-19 unless the employee asserts it is work-related or files a claim form.

• The date the specimen was collected for the employee’s COVID-19 test.

• The specific address or location of the employee’s place(s) of employment during the 14-day period preceding the date the test specimen was collected.

• The highest number of employees who reported to work at the specific location(s) in the 45-day period before the last day the COVID-19 positive employee worked there.

It best practices to follow all local, state and federal guidelines for safe workplaces. However, even with the best intentions and precautions, COVID-19 may accidentally spread to employees. Again, when in doubt, report an employee COVID-19 case to your workers’ compensation carrier and allow them to determine how to proceed.

For questions about SB 1159 and how it with affect your organization’s workers’ compensation, contact your broker or reach out to Rancho Mesa at (619) 937-0164.

Commissioner Lara Approves WCIRB Proposed Amendments Addressing COVID-19

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

California Insurance Commissioner Lara has approved, as filed, the proposed special regulatory filing submitted by the Workers’ Compensation Insurance Rating Bureau (WCIRB) concerning proposed amendments addressing the Coronavirus Disease (COVID-19). The special regulatory filing is effective July 1, 2020 and will apply retroactively starting March 19, 2020, the day California Governor Newsom issued the Stay-at-Home Executive Order N-33-20. Those amendments are as follows:

New COVID-19 Rule: Clerical Office Employees

Part 3, Section III, General Classification Procedures, was amended to add Rule 7, Coronavirus Disease 2019 (COVID-19), to permit during a statewide California COVID-19 stay-at-home order the following: The division of an employee’s payroll between Classification 8810, Clerical Office Employees, and a non-standard exception classification when the employee’s work is exclusively clerical in nature and the non-standard exception classification does not include Clerical Office Employees. This amendment will conclude 60 days after the Stay-at-Home Executive Order N-33-20 is lifted.

New COVID-19 Rule: Basis of Payroll

Part 4, Section IV, Exposure Information, Rule 1, Classification Code, and Rule 4, Exposure Amount, were amended to report payments excluded from remuneration pursuant to new Rule 7, Coronavirus Disease 2019 (COVID-19). Payments made to an employee while the employee is performing no duties of any kind in service of the employer are to be excluded from payroll when the payments are equal to or less than the employee’s regular rate of pay. This amendment will conclude 30 days after the Stay-at-Home Executive Order N-33-20 is lifted.

New COVID-19 Rules: Claims Reporting

Part 4, Section V, Loss Information, Rule B, Loss Data Elements, Sub rule 4, Catastrophe Number, was amended to add Catastrophe Number 12 for the reporting of COVID-19 claims. Appendix III, Injury Description Codes, Section B, Nature of Injury (Positions 3-4), and Section C, Cause of Injury (Positions 5-6), were amended to add a Nature of Injury code and a Cause of Injury code for COVID-19 claims. This amendment includes claims with an accident date after December 1, 2019, reported on a Unit Statistical Report due on or after August 1, 2020, and reported with a Catastrophe Number 12.

Exclusion of COVID-19 Claims from Experience Modification

Section VI, Rating Procedure, Rule 2, Actual Losses and Actual Primary (Ap) Losses, was amended to specify that all claims directly arising from a diagnosis of Coronavirus Disease 2019 (COVID-19) shall not be reflected in the computation of an experience modification.

For a greater understanding of these changes and how they will impact your company please contact our team at (619) 937-0164.

Special COVID-19 Workers' Compensation Filing and Executive Order Imminent

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

The Workers’ Compensation Insurance Rating Bureau (WCIRB) voted unanimously this past Friday, April 17, 2020, on a special filing and sent it to the Insurance Commissioner for signature. If approved, this order would:

• Exclude COVID-19 claims from the experience rating formula.

• Exclude from premium calculations payroll paid to employees who are continuing to be paid while not working.

• Allow the assignment of Classification 8810 on a temporary basis to employees who are now working from home whose temporary duties meet the definition of a clerical office employee.

Each of these changes will have their own nuances and it remains to be seen how exactly their implementation, auditing and tracking will be put into practice.

Separately, but equally important, Governor Newsom is considering an executive order that would create a “conclusive presumption” that COVID-19 illnesses and deaths sustained by “essential workers” are work related and therefore covered under workers’ compensation policies. The potential scope and impact of the order are not yet known, but on April 20, 2020, the WCIRB released a projection that the annual cost of COVID-19 claims on “essential critical infrastructure” workers, under a conclusive presumption, ranges from $2.2 billion to $33.6 billion.

These decisions, should they be implemented, will create significant disruption in the workers’ compensation marketplace and to all insurable businesses in California. As these decisions are rendered, Rancho Mesa will continue to provide resources and implementation strategies to help businesses adjust through these uncertain times. If you have questions or want to discuss this in greater detail please reach out to your broker or account manager.

Potential Workers’ Compensation Changes Due to COVID-19 Claims

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

Last week the Workers’ Compensation Insurance Rating Bureau (WCIRB) began developing emergency regulations resulting from the COVID-19 crisis that will be presented to the Insurance Commissioner in the coming weeks. The major areas to be addressed are:

Experience Rating Calculations

Dave Bellusci, Chief Actuary at the WCIRB, indicated that they are “leaning toward excluding COVID-19 claims from the calculation.” This would entail setting up new nature of injury and cause of injury codes that would identify these claims.

They are also leaning towards excluding the payrolls for workers who are not working because of the pandemic and shelter-in-place orders but who are still receiving all or a portion of their salaries or are being paid through sick leave benefits.

Class Code Classifications

Those sheltered-in-place workers who are being paid and either not working their customary jobs or not working at all has created a question about how that payroll should be classified for premium purposes. Should that payroll be classified in its usual class code or be adjusted into another class code such as clerical or a code specific to COVID-19. These are all questions being considered.

Any potential changes like these in question would be temporary and require that employers document how the employees in question were not working their customary jobs during this time and were performing clerical functions.

Our Answer

Rancho Mesa is collaborating with several regional and national workers’ compensation carriers on a form that will be able to capture this information for businesses affected by these new work restrictions. Accurate and accessible documentation will help both businesses and their workers’ compensation carrier make the necessary adjustments at audit.

At this point, these are only preliminary responses that are being discussed. While nothing has been passed into law, it seems highly likely that the WCIRB and the Insurance Commissioner will agree on some type of new legislation. When and if this occurs, we will provide full details and specific strategies to assist.

If you want to be kept informed of any changes and are not currently on our weekly newsletter list, please subscribe to our email distribution list.

Distracted Driving, Not Just an Automobile Insurance Issue, Bad News for Workers Compensation Too

Author, David J Garcia, A.A.I, CRIS, President, Rancho Mesa Insurance Services, Inc.

I’ve written at length on the negative effects distracted driving is having on the automobile insurance industry and its impact on the rise in accidents, claim costs, and increases to your automobile premiums. But, have you considered its effects on your Experience Modification Rate (EMR) and ultimately workers’ compensation cost?

When one of your employees is injured in an automobile accident while working on your behalf, Arising out of Employment (AOE) / Course of Employment(COE) their sustained injury will be covered by your workers’ compensation policy, regardless of fault.

“Regardless of fault?!”

When a third party is deemed at fault and the injuries to your employee(s) have been settled, your workers’ compensation insurance carrier may “subrogate” their costs to the carrier representing the at fault driver. Now, here is the realty – studies have shown that 14.7% (4.1 million) of all California drivers are uninsured, while another large percentage of drivers hold the California minimum limits of $15,000/$30,000. What this means is that even if subrogation is a possibility, the likelihood of a “full” recovery is not probable. Thus, all the costs of the injury to your employee(s) will likely be the sole responsibility of your workers’ compensation carrier and this claim cost negatively affects your EMR and loss ratios for years to come.

What can you do?

You can implement a strong fleet safety program that includes a policy pertaining to distracted driving. When your employee is involved in a motor vehicle accident, adherence to your company’s accident investigation protocol is crucial. Documentation will prove pivotal for your carrier if subrogation becomes a possibility.

For our clients, through RM365 Advantage, we have a number of resources: fleet safety programs that can be customized, fleet safety training topics, fillable and printable accident investigation forms, archived fleet safety workshop videos, and more, in both English and Spanish. You can access this through our RM365 Advantage Risk Management Center or contact our Client Services Coordinator Alyssa Burley at aburley@ranchomesa.com.

If you are not a current client of Rancho Mesa, we encourage you to reach out to your broker for assistance or email Alyssa Burley to get additional information or to ask any questions.

Independent Contractor Classification Changes Expected to Impact Construction Industry

Author, David J. Garcia, AAI, CRIS, President, Rancho Mesa Insurance Services, Inc.

With the recent ruling by the California Supreme Court concerning how 1099 employees (independent contractors) are defined, the construction industry's approach to utilizing these workers has changed significantly. The Court adopted a new test to determine whether the worker should be classified as an employee or independent contractor. The previous test to determine if a worker was an employee or independent contractor was whether the employer had the right to direct the manner and means by which the worker performed the services. Under the new test, a worker is considered to be an independent contractor only if all three of the following factors are present:

1. The worker must be free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; 
2. The worker must perform work that is outside the usual course of the hiring entities business;
3. The worker must be customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

These new factors have major implications for contractors, or any business for that matter, where previously they had classified a worker as an independent contractor and now have to classify them as an employee. This will impact several lines of insurance, but most critically workers' compensation, general liability and employee benefits.

Workers' Compensation

Currently, if an employee is classified as an independent contractor, they would not be subject to any workers' compensation premium nor workers' compensation benefits. If their status should change to employee, they now would be entitled to workers' compensation benefits and would have their payroll accounted for in the employer’s premium. In addition, based on the work being performed, this may change the employer’s risk profile, creating negative underwriting consequences in the workers' compensation carrier marketplace, resulting in coverage not being offered or higher premiums.

General Liability

The impact to general liability insurance is very similar to that of workers' compensation. Additional payroll or sales will need to be accounted for as the employer will become directly responsible for the work being performed without the benefit of any hold harmless agreement or other risk transfer methods. This could potentially change the risk profile of the employer’s operations, which could result in the employer needing to provide additional underwriting information.

Employee Benefits

Since 1099 contract workers are not employees and are considered self-employed, they do not show on the Quarterly Wage and Withholding Report (DE9 and DE9C) to the State of California. Because of this status, they typically cannot enroll in a group health insurance plan. Many workers who are now classified as independent contractors will be considered employees in the eyes of the state and will be eligible for group benefit offerings from their employer.

Employers may need to reevaluate their group size to ensure that they remain compliant with the Affordable Care Act (ACA). Employers with 50 or more full-time employees working a minimum of 30 hours per week, and/or full-time equivalents (FTEs) must offer health insurance that is affordable and provides minimum value to 95% of their full-time employees and their children up to age 26, or be subject to penalties.

While these changes are new and just beginning to take affect, we believe your best strategy moving forward is to consult with your trusted advisors in legal, accounting and risk management. This will have a significant impact to the construction industry throughout California and we intend to take a leadership role in helping those companies with concerns and questions. So, please reach out to our Rancho Mesa Team to help you navigate these changes. Contact Alyssa Burley at aburley@ranchomesa.com for assistance.