A recently released study about Workers’ Compensation insurance issues revealed that cost containment (59 percent) was the number one concern of the 3,500 employers surveyed. Representing 20 different sectors, the employers were also concerned about increasing exposures (35 percent), renewals (35 percent), and rising fraud behaviors (31 percent). Some 57 percent of those participating reported Workers’ Compensation premiums under $50,000 annually. Market availability was a concern of 26 percent of respondents, and just over 20 percent were worried about carrier stability.
Participants said the most effective measure they took to control Workers’ Comp cost was having a safety-minded culture (65 percent). Since each workplace is different,there is no blueprint for achieving a positive safety culture; however, it’s much more than sound bites from management about its commitment to safety.
A positive safety culture takes years to develop and results in everybody feeling accountable for their work environment and working safely whether anyone is watching or not. You can see it and feel it – from housekeeping to management, the right things are being done.
Employers that recognize a safety culture as a continuous process and work at identifying ways to further reduce injuries and illness have successfully reduced Workers’ Compensation costs. According the survey, popular cost measures include:
A light-duty or return to work program. While 59 percent noted this as an effective tool, only 45 percent of respondents reported having a written return to work policy.
Onsite accident evaluations
Loss prevention evaluations
Having a dedicated claims manager
Safety committee efforts
A preferred occupational medicine facility
A key driver of Workers’ Compensation cost is an employer’s Experience Mod; yet, it is probably one of the most confusing and misunderstood aspects of Workers’ Comp insurance. At its core, the Experience Mod compares the loss or claims history of a company during the prior three policy years to all other companies in the same industry that are similar in size. Generally, an Experience Modification Factor less than one reflects better-than-average experience, while an Experience Modification greater than one reflects worse-than-average experience. Even if the Mod is below one, it probably can be better.
While many employers may know their Experience Mod, few know how low their Mod can go. In this survey, 88 percent either did not know the value of their loss-free rating (or minimum mod) or were not familiar with the term. This is what the Experience Mod would be if there were no losses in the experience period. This is not a flat rate, but varies from year to year with changes in payroll, classifications and expected loss rates.
Knowing the minimum Mod and striving for it can result in significant savings. For example, if your Mod is .85, but the minimum Mod is .61, .24 of your Mod is controllable. With a $100,000 premium, lowering the Mod to the minimum would save $24,000. Focusing on lowering an Experience Mod even a few more points is critical for cost containment.
The other concerns – increasing exposures, renewals, and rising fraud behaviors -were not surprising in light of recent trends. The uncharted territory of mobile device exposure, increasing chronic pain claims, dependence on opioids, nanotechnology, chemical as well as catastrophic exposures have meant more risk for employers. A hardening market raises renewal and availability concerns as rates rise and fewer insurance carriers are willing to entertain specific risks or credit rates and some leave the market.
Anecdotally, some believe the recession has added to fraudulent claims. However, the fastest growing area of Workers’ Compensation fraud is narcotics abuse. The need to feed a drug addiction or obtain narcotics for resale, is a fast growing problem in the Workers’ Comp arena. There are steps that employers can take to stop this type of fraud including drug screening after each injury, medical provider relationships and operating a drug free workplace.