Safety Programs Can Reduce Workers’ Compensation Premiums

Author, Daniel Frazee, Executive Vice President, Rancho Mesa Insurance Services, Inc.

As California business owners continue incurring costs as they work their way through the maze of ever-changing COVID-19 regulations and protocols, prioritizing critical elements of your internal safety program can directly lower your insurance costs. Refocusing on key areas below will help present an effective, detailed submission to the marketplace that will lead to talking points with an underwriter for schedule credits and ultimately, lower rates and premiums.

Employee Benefits

Workers’ compensation underwriters pay close attention to employee benefit plans from a submission they are reviewing to quote. A deeper dive will create inquiries on overall employee participation, employer’s contribution to the plan, and whether established “wellness” plans are made available. High participation and contribution can show underwriters that employees value the benefits being offered and that the employer is investing in their most important asset, the employees. Lastly, industry professionals commonly link reduced fraudulent workers’ compensation claims to more robust, supported employee benefit programs.

Formal Safety Program

Developing a formal, documented Injury and Illness Prevention Program (IIPP) is truly just a baseline for managing risk for any business. The IIPP must be a living, changing document that contemplates random/periodic inspections, regular meeting intervals, safety orientation for new employees, and detailed investigative reports performed by field and management. Your program can be compared to a book that sits on the shelf and develops dust. Or, if you are focused on best practice techniques, it can be used as a tool for education, training, and risk mitigation. It should change as your company changes and incorporate the safety priorities instilled from the top down. Additionally, incorporating safety programs like Rancho Mesa’s RM365 Advantage Safety Star™ training program for foreman and supervisors help make your safety program go to the next level and really stand out in the insurance marketplace. Dynamic IIPPs stand out in a workers’ compensation submission process. They provide much needed detail to simple Yes/No questions on a supplemental application and show just how important safety is to the organization that is being underwritten.

Return to Work Program

Companies of all types will share that they support a return to work program when their injured employee is cleared for modified duty. That support needs to be taken a few steps further to improve your program. Create job descriptions for potential modified positions. Identify and engage with specific doctors within your network and ensure that these job descriptions are on file. This process can often help expedite employees back to the field, warehouse, office, etc. and ultimately lower temporary disability payments which can lower claim reserves. Use Rancho Mesa’s RM365 HRAdvantage™ portal to generate job descriptions and manage employee’s modified duty in the Risk Management Center.

Hiring Practices

Developing “gates” in the hiring process are often overlooked as too expensive or time consuming.  But, the costs of bad hiring decisions can linger for years, impacting your bottom line and employee morale. Employers must strongly consider pre-employment physicals and drug testing, typically performed post interview and before an offer is made. As the Compliance Director for Current Consulting Group LLC, Andrew Current said, “The average cost of a pre-employment drug test is $45. The average turnover cost for an entry level employee is $6,600.”  There is added benefit with workers’ compensation underwriters who view pre-employment checks as key controls to minimizing claim frequency and severity. Take advantage of the New Employee Onboarding Checklist and other resources in the RM365 HRAdvantage Portal.

Website Development

Most, if not all, workers’ compensation underwriters begin their review process by accessing the company in question’s website to learn more about their operation, exposures, risks, etc. Therefore, seeing your website through this same filter and utilizing your broker as an additional soundboard of information, consider these possible edits and/or redesign of your website:

• Add a “Safety” link or tab, allowing space for sharing your company’s philosophy on managing risk.

• Include a section on any safety awards or recognition that you may have received.

• Remove any pictures on your website that might create confusion or concern about your operation as it relates to safety and risk.

• Include examples of safety protocol that are unique to your operation (e.g. proper use of machinery, ladder usage, cleanliness of operating areas, etc).

Like any potential internal investment, companies must always balance whether the time and resource commitment will ultimately benefit their company. Many of the above recommendations require minimal resources and can pay huge dividends in consistently securing the most competitive workers’ compensation pricing, often a significant line item on a profit and loss statement. You may find cost savings in areas you did not know were possible that can help your business survive and remain profitable in these difficult times.

To discuss how your company’s safety program can affect your workers’ compensation premium, contact me at (619) 937-0172 or dfrazee@ranchomesa.com.

Ask the Expert: Insurance Questions from the Lawn and Landscape Industry

Author, Drew Garcia, NALP National Program Director, Rancho Mesa Insurance Services, Inc.

How can I control and/or lower my experience rating?

Without getting into detail about the formula or governing insurance bodies, here are some key items to focus on in order to lower your experience rating (i.e., experience modification, MOD), no matter your jurisdiction.

Frequency vs. Severity (Proactively Track and Eliminate the Claim Before it Happens)
Analyze your work related injuries and near misses to search for trends that will help to prevent similar claims from occurring.  Your rating will typically see more of a negative impact with multiple claims (frequency) as opposed to one large loss (severity).  Frequency drives the probability for more claims to occur in the future which would make your company a higher risk to insurer.  

Return to Work (Make it Mandatory)
All claims may potentially impact the experience rating in one way or another, with frequency having a large role in the mathematical formula.  Another key part of managing claim costs is the focus on reducing indemnity expenses on every claim.  By returning an employee to work you eliminate any claim cost that would have been allocated to temporary disability.  The savings you will see on your experience MOD is remarkable.  If you need help creating a return to work program, reach out to your workers compensation insurance carrier for guidance.  If you decide to implement any of these strategies going forward, implement a mandatory Return to Work program.  

Example:
An injured employee will earn $400 a week on temporary disability and is estimated to need three months of recovery.  The claim closes three months later with a total incurred claim cost of $4,800 in indemnity (wages) and $2,000 in medical, equaling $6,800.

With a Return to Work program, the injured employee is right back to work on modified duty and earns no temporary disability.  The claim closes for $2,000.  Not only will the claim have less of an effect on your experience MOD, but you will also have constant communication with the injured employee, which keeps them feeling part of the team, boosts their morale, and perhaps expedites the length of the injury.

Carrier Analytics (Save a $1 Today That Will Cost You $5 in the Future)
Who is handling your insurance claims?  When you purchase workers compensation insurance, you are buying a company’s ability to handle claims and how those claims are handled will determine your experience MOD, your cost, and your bottom line for years to come.  Carrier benchmarking reports are becoming critical in helping to evaluate the impact each carrier will have on your claim experience.  You should place your insurance with a carrier who has a history of writing policies for your specific industry and a proven track record of closing claims faster than the industry, and for less money, because that money is what drives your modifier through the roof. 

What are your thoughts on a safety incentive program?

I would suggest safety recognition as opposed to safety incentive, here’s why. An incentive program might keep employees from reporting work related injuries in fear that they might “ruin” a streak of consecutive days without an injury.  You do not want to make an employee fearful of reporting an injury.  OSHA and the Department of Labor have started to enforce these “dis-incentive” programs in a more visible way.

Safety recognition would mean identifying an employee who has successfully executed your company’s standard safety requirements or has gone above and beyond to better the company’s safety culture.  A type of recognition could be handing out raffle tickets to employees who have executed standard safety protocol and having a monthly drawing for prizes.

What is the key to having a safe company?  We have all the safety programs; we do tailgates every week; and, we still have claims, routinely!

In one word, the companies that experience the best safety records all share this common trait, communication. You can have all the compliance based safety programs in place but without superior communication they will lack true execution.  Proactively communicating with your team in the field, every day, is what it takes.  Safety must become a common attribute employees think of when they talk about your company.  It takes participation and “buy-in” on all levels from ownership to employee.  Employees must understand the exposures and job hazards associated with their work, but, the culture you are trying to create within your company should generate excellent decision making, like employees who think:

• “I probably shouldn’t lift this alone.”
• “That slope looks wet."
• “I should pick this up before someone steps on it.”

You cannot buy a good safety company. Like anything in life, it is earned.  With a concentrated effort, you can establish a solid safety program that becomes routine and everyone in your company will benefit from it.