EXCLUSIVE: Employers Ask, "Why Are Our Workers' Comp Costs So High?"

By Rebecca Shafer

Most employers believe that workers’ comp “insurance” is a cost of doing business but there is a lot that can be done to reduce those costs. Workers' comp premiums are based on a company's past experience and it takes several years for poor experience, meaning many injuries, to work out of your experience. So, once you have a year of heavy losses, you pay for those losses for several years. However, premiums are only about 30% of an employer’s workers comp costs and if you have an effective safety program, you will have lower premiums. The remaining 70% of workers’ comp costs is directly attributable to claim “losses”; these losses can be reduced. In effect, high workers’ comp costs are caused by …

TOO MANY EMPLOYEES STAYING OUT OF WORK TOO LONG.

Understanding why employees are out of work too long is a key to solving the puzzle. A company’s practices are assessed by consultants or an automated system like Workers Comp Kit^®, a cost-effective and uniform approach to diagnosing why comp losses are high. The Kit provides a WC Target Score^™ that is a numeric indicator of key cost drivers the company has implemented and those not yet in place. It takes 30-minutes to complete the assessment that results in a score of 1-100. The areas evaluated range from management commitment, claims administrator integration, communicating with employees, fraud control techniques, company policies and procedures. Exact detail of the areas covered in the Best Practice Assessment go to http://www.reduceyourworkerscomp.com/workers-comp-kit-areas-of-assessment.php

For a company with multiple divisions, EACH business unit receives a WC Target Score and the scores are ranked from Best-to-Worst. This provides the information for a CFO or Risk Manager to identify operations that need the most help. Being on the bottom of a list called the “Best-to-Worst” List provides incentive for the businesses at the bottom of the list – the worst performers -- to take immediate corrective actions. A risk manager, for example, can see that 15 divisions have scores from 38 to 94 – and can offer companies with the lowest scores immediate assistance.

In the past, uniformity was not possible, now however, a company with hundreds of locations can quickly identify those that are driving costs. Often, it is not one particular location that is causing the losses, but one best practice that is missing across all business units. In those cases, quick implementation of the missing practices in all units can correct the problem rapidly.

In addition to a WC Score, companies receive a Recommendations Report "Checklist in less" than one hour. A consultant can certainly be involved in the Workers Comp Kit process by brainstorming best practice implementation strategies and identifying “low hanging fruit.” specifying each best practice that is missing. With this checklist, companies can begin making changes immediately. In the past, when this was all done by hand, it took months. Now it can be done in less than one hour. A consultant can certainly be involved in the Workers Comp Kit process by brainstorming best practice implementation strategies and identifying “low hanging fruit.”

With Workers’ Comp Kit’s Score Tracker, as divisions make changes, their score improves and this improvement is monitored. Improvement can be used to make a case to the insurance company to reduce the premiums and collateral required for the policy.

Editor's note: To contact Rebecca Shafer, visit www.ReduceYourWorkersComp.com or call 1-860-553-6604.