Florida Small Business Owners need to prepare for Increase in Work Comp

On December 1st, rates on Workers Comp Premium are set to go up 14.5 % throughout the state of Florida. This could have a drastic impact on Florida Small Business.   

 

Approved by the Florida Office of Insurance Regulation (OIR), rates on premium for workers compensation are going to increase by 14.5 % beginning the first of December.  There are the reasons for this dramatic increase and it will have an immense impact of the Florida small business community. There were two court cases ruled on over the Summer and there was a Senate Bill that caused a very small portion of the increase.  The two cases were Castellanos vs. Next Door Company and Westphal vs. City of St. Petersburg.  The additional part of the increase was related to Senate Bill 1402 which dealt with a a new printing of the Florida Workers’ Compensation HCPR Manual.

 

Castellanos vs. Next Door Company

This court case was ruled on this year and it was between a Florida small business owner named Marvin Castellanos and Next Door Company.  Marvin was an injured employee who sued Next Door Company and the Florida Supreme Court overruled a previous court ruling from 2009. The previous ruling was overturned because it limited the ability of the claimant to get a reasonable amount for attorney’s fees.  Pretty much the previous ruling limited the amount a judge could award for attorneys fees. As a result, most of the money being awarded in workers compensation cases was going to the lawyers to cover their fees instead of going to the inured employees who it was meant for.  With this ruling in place judges merely had to use the previous fee schedule as a recommendation, but depending on the situations surrounding each case the can award more or less for attorney’s fees.  Because of this ruling insurance companies anticipate they will have to pay larger amounts for workers compensation lawsuits in the future. For this reason they asked for and were approved by the Florida Office of Insurance Regulation (OIR) a 10.1 percent on average statewide.

Westphal v. City of St. Petersburg

The next case that had a negative impact on workers’ compensation rates in the state of Florida was Westphal vs. City of St. Petersburg. This case was regarding the 104-week statutory limitation on temporary total disability benefits. This time period was ruled unconstitutional.  In its ruling the court stated the previous time period denied injured workers the ability to obtain proper right of access to the courts. The ruling extended this time period to 260 weeks.  Because injured employees will now be receiving partial salary benefits for an additional 156 weeks insurance companies were taking on additional risk to offer workers comp coverage within the state of Florida.  For this reason the OIR approved an average increase of 2.2 percent statewide.

Senate Bill 1402

The additional 1.8 percent increase on premium for workers’ compensation was related to updates within the Florida Workers’ Compensation HCPR Manual. This increase was approved as part of Senate Bill 1402.

 

What can business owners do to protect their business? 

Shop your policy

The first thing a Florida small business owner should do when they get sticker shock from their renewal quote is to shop their policy around to different agencies. One thing that can save you a lot of time doing this is to partner with an independent agent who has the ability to shop your policy with many different carriers. A lot of agencies have exclusive relationships with only one or a select few carriers. This dramatically impacts the amount you pay in premium, especially if you are in a difficult to quote class code. A typical independent agent can quote your policy with 10 or more insurance carriers. This gives them the ability to negotiate more effectively for more comprehensive coverage and better rates on premium.

Pay as You Go

Pay as You Go Workers’ Compensation is a flexible payment option that allows business owners to get coverage in place at a much lower price and allows them to pay their premium monthly based on the payroll each month.  This is an excellent option for cash strapped or seasonal businesses.

Broker of Record vs Agent of Record

Before you sign a BOR or AOR Here is what you need to know.  
A BOR is a broker of record notice or AOR agent of record. A Broker of Record is an agent designated by the policy holder to represent and manage the policyholders insurance policy.  Now before I move forward let me ask a question.  Does anyone work for free? Does anyone complete a job for a customer, but then the funds go to a competitor or a different local business? No that doesn’t typically happen. Except in the insurance industry. Let me also follow that up by saying I enjoy the customer service that I give everyday. By no means, do I think that every person coming to me for insurance will decide to let me handle their insurance needs.
Here is another scenario that may give you a better understanding of the BOR process and what it exactly means.  Let’s say a business owner decides their renewal rates for workers compensation or general liability insurance just can’t be the best out there. So what does the business owner do?  They can start calling other agents? I am assuming they call other agents because they either assume their agent has already looked for a renewal and can’t do any better. They may assume their current agent simply does not have the access to other more competitive markets.  But do they call and ask them to shop for better rate’s?
The first thing a business owner should do is jump on their own computer and search workers comp insurance (let’s keep to work comp). So here they are talking to an agent that is going to get all of the company information. Then this agent will shop all of the markets they have for this businesses particular industry. On average submitting to 3-6 markets. Then presenting that business with new applications to sign and a shiny new quote with not just a better price but a better rate per 100 in payroll.  Most business owners are are so happy that they are saving money (hopefully a lot), but even if it’s only a little hey every penny counts right. At this point most business owners will call their current agent and telling them some similar to, I’m not renewing my policy with you. I found a better price.  At that point the business owner has the agents attention!  At this point the agent decides to start submitting to all of the insurance carriers they are appointed with.  The agent will do this in order to see if they can match or beat the pricing you got from the other agent (me).  This may not be because they were not doing their best work for you in the first place. It may be you were not clear to them what your priority was to begin with.  Agents speak with many business owners with many different priorities. Some just want a quote, quickly so they can get back to their business. Others do not mind waiting to get the absolute best deal.
Here is how I imagine the next scenario goes. The current agent that most likely wants to keep your business will ask what carrier is offering better pricing?  The business owner may tell them who the carrier is and the current agent will say, oh I am appointed with that particular carrier.  I can get you those rates.  The current agent would then asks you to sign a BOR or AOR letter, letting them take away the work they did for the business.
I understand this is an imperfect situation, but this is the name of the insurance agent game.  So the next time you are shopping take into consideration the time, effort and work the agent you called for help put into saving you money before you sign a BOR letter.

6 Tips for controlling the cost of a Workers Compensation Claim.

  1. Quickly report all claims to the insurer.

Some states have requirements for how quickly a workers compensation claim must be reported. Insurance carriers have specific departments that deal with claims exclusively. They will know the process thoroughly for filing a workers’ compensation claim. Because this is a process your business hopefully does not deal with frequently, getting your injured worker the proper coverage quickly will be easier with the help of your carrier.  Documenting the claims allows the carriers to pick up on patterns and help businesses develop programs to prevent common injuries.

  1. Make sure supervisors are adequately trained.

Taking care of an injured employee may not be at the top of the priority list when hiring a manager for your business. Hopefully it is not something your managers have to encounter very frequently, but it needs to be something they can effectively deal with for the success of your business. Many businesses have a point person who studies the workers compensation claim process thoroughly. It is still important to have this person train the other managers to be aware of this process in case of an incident occurring when they are not on duty or away on vacation.

Communicating with your employees is important to limiting the impact of a workers compensation claim.

  1. Keep complete notes of the injury and reporting process.

Note taking is crucial in everything you do within your business. This is especially important when you experience a workers compensation insurance claim.  It may seem tedious, but it can save your business immensely if a claim makes it into the court of law.  Besides the fact you need to cover your business legally, accurate documentation helps your carrier document injuries within your industry. They can use this information to see patterns and to determine appropriate safety programs to deal with those patterns.

  1. Communication is key.

Communicating with all parties involved in the workers compensation claim is extremely important. This starts with communicating with your employee. In most states they have the right to seek a second opinion, but the more you keep your carrier in the loop of these situations the better they can help you control the cost of the claim.  Separate from the cost of the claim, it is in your best interest to let your injured employee know you care about their well-being.  Communicating with both your insurance agent and carrier is important as well. The carrier is the one equipped to handle the claim, not your agent.  The agent can be helpful if you feel your carrier is not living up to your expectations. Keeping them updated on the workers compensation claim can help you ensure you are getting the proper attention from your carrier and they can help you prepare for explaining the claim when you go to renew your policy.

A proper safety program can prevent employee injuries and limit a workers compensation claim.

  1. Prevent employees from injuries.

Safety programs are key to the long term success of your business. Making a safety plan part of your ongoing training is essential to your business and it does not have to take a lot of time.  Fifteen minute discussions two or three times a month should be sufficient. Make sure the meetings have a specific topic and ask for feedback from your employees. Asking for their feedback gets them involved in the discussion. This will make them more involved in the program. It can lead to higher job satisfaction if those employees feel like you are listening and make changes based on their feedback.

  1. Create a return to work program.

Studies have shown that the quicker a person gets back on the job in any form or fashion, the more likely they are to return to permanent work.  Humans are creatures of habit. Coming to work is part of their habit and the longer they go without that habit the more likely they are to create new habits not associated with your business. This is when a claim can get out of control if an injured employee goes on long term or permanent disability.  Designing low impact work of some kind will allow those employees to return to work and get back in the routine of work quicker.

How Competitive Workers Compensation Rates Develop

Workers compensation rates are developed by claims and premium paid within each industry, per state over a period of multiple years.  In most sections of the U.S., each State sets a minimum and maximum rate for each industry code.  Within the minimum and maximum rates established by the state competitive insurance companies are able to file their rates for each industry depending on how competitive they want to be.  Depending on the characteristics of a particular business, insurance companies could be willing to discount or increase their rates.  Each state also sets a minimum and maximum amount of credit or debit an insurance company can use when quoting.  When researching rates, lower rates indicate an industry that is less likely to suffer a claim and higher rated industry codes indicate a higher risk of a claim.  The lower hazard industries have more options therefore more competition than the higher hazard industries.  More competition typically means those industry types are going to pay considerably less than a higher risk industry with only a few options willing to quote.

Identify the areas that cause the greatest concern for workplace injuries.  Business owners in all industries can increase their chances of paying the lowest workers compensation rates by implementing proper policy and procedures to prevent claims.  Which policy and procedures to implement will not be the same for all industries.  A restaurant would have different exposures that could cause a claim than a remodeling contractor.  When quoting your business, make sure you highlight the areas that your business has implemented that prevents claims.  Brag about the areas that make your business different than other businesses in the same industry.  In my opinion, most business owners and agents are focused on which insurance company has the lowest rate.  Instead, the business owner and agent needs to tell the story of that business and the components of that business that make it attractive to insure.  Just because an insurance company has one of the lowest rates for a particular industry doesn’t mean they are the most competitive option.  Insurance companies that are willing to apply credits/discounts based on business practices to prevent claims will typically be the most competitive options.  If your agent is not asking about your business practices, they are not properly selling to their underwriters to get the best possible pricing.  Below is a short list of ways a business owner can help reduce their workers’ compensation costs.  These are the things that insurance company underwriters want to know about in order to properly price their quote.

  • Business owner is active within the business. When a business owner is active and around employees, typically those employees follow the policies and procedures more carefully.
  • Proper training of how to handle situations that could cause workers comp claims. If you own a convenience store, how should employees handle a robbery?
  • Return to Work Program. History shows that the sooner a business owner can return the injured employee to work the less expensive the claim will be.  Even if you have to create a light-duty position temporarily.
  • Establish a safety program and enforce discipline for not following proper procedures.  This can positively impact your workers compensation rates.
  • Conduct safety meetings. Constantly reinforcing helps prevent injuries.
  • Employee Training for the job they are performing, equipment they are using.
  • Designate Key Employees to be responsible for holding employees to the standards of your business
  • Update your equipment when needed, make sure it has the proper guarding to prevent injuries.

10 terms to help you navigate the Workers Compensation System

Previously we wrote about several common terms related to commercial insurance here.  These were terms that a business owner should familiarize themselves with before renewing any commercial insurance policy. especially before interacting with their states workers compensation system.  Here is a list of terms you might come across related specifically to workers’ compensation insurance. Some of the terms may not have to do with your renewal specifically, but if you use the workers comp system long enough you very well may come across some or all of these terms.  

 

Aggravation:  Aggravation usually implies a fresh incident producing additional impairment to a previously injured anatomical region. Aggravations are usually not temporary.

Carrier Code:  The ten-character code that identifies a specific insurance carrier. W is always the first character in the code for a carrier of Workers’ Compensation policies. The codes for carriers of Disability Benefits insurance always begins with the letter B. Carrier codes are issued by the Finance Office of the WCB.

Claims administrator:  The term for insurance companies and others that handle your workers’ compensation claim. Most claims administrators work for insurance companies or third party administrators handling claims for employers. Some claims administrators work directly for large employers that handle their own claims. Also called claims examiner or claims adjuster.

Date of Injury (DOI): If the injury was caused by one event (a specific injury), this is the date of the event. If the injury was caused by repeated exposures (a cumulative injury), this is the date that the worker knew of should have known that the injury was caused by work.

First Report of Injury:  Each state has their own form that should be filled out anytime an injury occurs on the job. They should be reported no matter how minor the injury is. Insurance carriers track these forms to look for patterns of injuries and to help employers prevent injuries from becoming more severe or more common. Here is an example of one of these forms from the state of Wisconsin.  

Functional capacity evaluation (FCE):  An FCE is a series of tests administered to a workers’ comp claimant by a physical therapist or other health care professional. They can be beneficial in determining an injured worker’s capabilities and restrictions.

Independent Medical Examination (IME): Am IME is a medical evaluation that is used to resolve questions about your medical condition, including what treatment is necessary and the degree of your permanent impairment, if any. An IME is most often requested by the insurance company when there is a question about what treatment you need or what permanent disability rating you should be given.

Loss Ratio:  The relationship of incurred losses compared to the earned premiums expressed as a percentage. If, for example, a firm pays $100,000 of premium for workers compensation insurance in a given year, and its insurer pays and reserves $50,000 in claims, the firm’s loss ratio is 50 percent ($50,000 incurred losses/$100,000 earned premiums).

National Council on Compensation Insurance (NCCI):  NCCI is a U.S. insurance rating and data collection bureau specializing in workers’ compensation. Operating with a not-for-profit philosophy and owned by its member insurers, NCCI annually collects data covering more than four million workers’ compensation claims and two million policies.

Workers’ Compensation Audit:  A review of the compensation paid during the policy term to determine whether the exposure used to determine the original premium was accurate. If during the policy term, the actual exposure changed from the original estimate of what it would be, then an adjustment to the premium would be made at the time of the audit. If there was more exposure than the estimate indicated, then more premium will be charged. If there was actually less exposure than the estimate, premium will be refunded.

 

 

3 ways to managing risk in the Non-Profit Industry

There are many reasons why people go in to the non-profit industry.  Some people want to fight poverty, some work closely with a church and others might be dedicated to fighting a disease.  One common theme among people who work in the non profit industry is that they want to be a part of something greater than themselves.  One thing many people in this industry do not anticipate is having to manage risk, but this can be one aspect of their job that can ultimately determine the success or failure of the organization.

Find the best answers to your Non Profit Insurance questions at MyInsuranceQuestion.com

Many people who go in to this sector do not anticipate having to manage risk or buy insurance. They probably do not anticipate their jobs causing them to have to worry about things like a return-to-work program, workers’ compensation benefits or general liability insurance. As a non-profit professional, how effectively you handle these aspects of your organization will contribute immensely to the success or failure of your organization. For that reason we have created three main tips for managing risk within your non-profit agency.

 

Have an effective safety program in place.

Having an effective non-profit safety program in place is essential for all non-profit organizations.  Most non-profits depend on people volunteering their precious time and money to the organization. The last thing you want to happen is for a volunteer to be injured while helping your organization. A safety program can prevent this from happening.

First and foremost, reporting and documenting injuries needs to be a part of your company culture. It should start with the first training all employees get during the on-boarding process. Employees need to be well aware of how to inform volunteers how to properly do their job in a safe manner.  This can go hand in hand with your business’s safety program and your business’s safe driving program.  Another thing to keep in mind is that how safe your organization takes safety starts with you and your key employees.  If you stress safety as the professional, your employees and volunteers will also value this safety program.

Non Profit Insurance Answers

When should a new or small non-profit decide to purchase insurance?

For a new non profit, insurance may not be necessary at first, but it is not something to be taken lightly. No matter what the financial situation is of an organization, the quickest way to fail as a non-profit is to not secure adequate insurance.  Your state laws will determine when you must purchase coverage. Workers’ comp and general liability are typically the first two policies you will find a need for.  Workers comp protects your employees and general liability protects your organization from damages to third parties.   Even if you are fairly sure you have proper coverage or do not need coverage at this time, consulting with an insurance professional with whom you trust is a very wise decision.  If you know someone who works in risk management or insurance, it might be a good idea to ask them to sit on your board of directors.

Have a return-to-work program in place for injured employees.

Operating an effective return-to-work program is another aspect that will contribute immensely to the success or failure of your organization.  Ideally you will never have a need for a return to work program because none of your employees will ever be injured on the job. But as you very well know, we do not live in an ideal world. For that reason it is crucial for you to prepare for the day when you do have an inured employee. If you are prepared, you will be able to get those employees back on the job quickly and control the cost to your organization.   Any work you have to get the injured employee involved in the organization will benefit the injured employee and your organization in the long run.  Getting people back on the job quickly is important because the quicker they are back on the job the more likely they are to not become an injured worker long-term or permanently.

How can I Lower my Workers Compensation Insurance Premium?

Workers compensation insurance premium is often a large portion of overall property and casualty insurance costs. Many business owners look at the workers compensation premium and wonder how they can reduce the overall cost of the insurance policy. The following ideas can help reduce your costs and hopefully help make your business more profitable.

Make sure you are classified properly

Business will have a classification code determined by National Council on Compensation Insurance (NCCI) or some cases the State will have a slightly different number that is used by insurance carriers to rate workers compensation insurance premium. For Example one way to reduce your cost is to take advantage of standard exceptions to the code classification. Employees who perform clerical duties and are physically separate from manufacturing operations may be classified as clerical employees with a much lower rate. Make sure the classification for your employees is appropriate.

Monitor your loss control and safety programs

Loss Control and Safety is critical for preventing losses in the workplace. Set the expectation in your safety manual. Follow up by reminding employees of safe practices including lifting, distracted driving, and the hazard of wet floors. Scheduled safety meetings and incentive programs should be used to promote workplace safety. Decreasing losses will reduce your overall insurance costs.

Develop an effective return-to-work program 

Develop a return to work program. Having injured employees staying at home collecting workers compensation will raise your costs on premiums and also on additional labor you will need to hire while that person is out. A way to get your injured employee to return to work as soon as possible is to create a temporary position for that person. You can give them duties that are not taxing on the body so that they will still be able to recover while they are working.

Speak with your agent about adding a deductible

Evaluate the benefit of adding a deductible to your Workers’ Compensation program. A deductible provides an immediate credit to the workers compensation insurance premium calculation. Additionally, losses under the deductible will not be reported to NCCI and will cause a reduction in your experience modification. Be sure to analyze the cost of funding your deductible.

Notice if there is a pattern to workers compensation claims. Determine if certain areas of your business have fewer claims than others, and determine why the risk is lesser or greater in different areas. Reduce risk by duplicating safe behaviors and programs and eliminating risky behaviors.. Eliminate workplace hazards that have caused an employee to get sick or injured so it doesn’t happen again. Some carriers will even provide help in this area. 

Report claims ASAP

Report Claims as soon as possible! Provide medical attention quickly if an employee is injured, as prompt medical attention may reduce complications that may arise from delayed care. Complications can make workers’ compensation claims more expensive, which may increase insurance premiums.Statistics prove that losses reported 24 hours or more after the loss are more expensive than those reported promptly. Managing your Workers’ Compensation program carefully can save money and improve your bottom line.

These are just a few ideas that can help you in either keeping your premiums low or driving them down. Every business wants to be more profitable and it can be as simple as investing in work place safety that could get you started in the right direction.