Often times I speak to business owners that are experiencing difficulties with their work comp coverage. Either they are being non-renewed and cannot locate an alternate option OR their renewal pricing has skyrocketed to a point they are begging for help to locate a less expensive alternative. Typically, the difficult situation is related to claims. Below is a real life situation with a business that I assisted solving their difficult workers’ compensation situation and how the changes they made within their business helped decrease their pricing in future policies. For purposes of privacy, I am using a false business name, Test Company, Inc.
When Test Company, Inc. contacted my agency, they were up against a non-renewal, no other insurance company options and had employees in multiple states. Within work comp there is a state program that is required to offer coverage even with bad claims history or a difficult industry to insure. The state workers’ compensation programs are higher rates and typically do not have a flexible payment plan so cash flow becomes an issue. Also, instead of having 1 annual workers’ compensation audit for all states with 1 company, Test Company, Inc. was going to need to complete 12 audits, 12 separate policies to monitor and make payment to. Most state policies only cover that particular state so a separate policy is purchased for multiple states when private insurance companies are not willing to quote.
Test Company, Inc. had grown from 0 to 6MM in gross receipts in 5 years and suffered several very substantial claims. Their workers’ compensation cost had increased from 200K to nearly 500K due to their claims experience generating a very high experience modification rating and the competitive companies unwilling to quote. The ownership of the business was so focused on growing, they didn’t think about how claims were going to cause this big of a problem with their workers’ compensation coverage. Claims were happening over multiple years of coverage and it finally caught up to them so they were forced to identify the problems and fix them.
Together we identified the reasons for the claims and communicated about realistic business practices that needed to be implemented to prevent similar claims from happening in the future. The employees working in the field have a constant driving exposure and when working at the customer’s home, the Techs are moving heavier items. There was a driving and lifting exposure that were causing the claims. First step was to set-up a Motor Vehicle Report (MVR) program to review the driving history of the employees in a vehicle to make sure those employees have a safe driving record. When setting up a MVR program Test Company, Inc. must establish a set of requirements that are considered “a safe driver”. Most work comp providers have resources the insured can access to help with establishing guidelines to prevent claims, ask the insurance companies “loss control department” for assistance if your agent doesn’t know. Secondly, we discussed hiring practices for Techs. Since these employees have a lifting exposure it’s important to hire employees that are strong enough and haven’t experienced injuries in the past that could lead to a large workers’ compensation claim. A pre-employment and annual physical for all Tech’s was the solution Test Company, Inc. implemented.
With a business of this size and growing, claims are going to happen. When there is a claim, what can Test Company, Inc. do to minimize the amount paid?
It’s amazing how stories throughout the process of a work comp claim happen. One of the best suggestions to prevent an employee’s story from changing is to Immediately document the injury, have the employee sign the injury report form, have a supervisor or key employee drive that employee to the medical clinic and have the supervisor or key employee sit with the doctor’s office when explaining what happened that caused the injury. Record it with a cell phone if it’s allowed and you think it’s needed. These steps will prevent a story from changing and an employee’s injury mysteriously becoming more serious than it should have been.
Return to Work Program. This particular insurance company has a non-profit program where their insureds can set-up a light duty return to work program with a local participating non-profit. Test Company, Inc. did have a work comp claim where the Return to Work Program worked perfectly. The Tech employee hurt their back, therefore, could not lift the objects within the homes they would be working on. This employee was set-up with a local non-profit where the employee sat at a table and folded towels. 2 days of doing this and the employee’s back felt better, he was released by the Doctor, the claim was closed and the employee returned to work.
When making these changes it’s extremely important for Test Company, Inc. to put them within their Employee Handbook, communicate those changes to the employees and have them sign off on a notice form. This helps set the standards for current employees and future hires.
The pricing decrease doesn’t happen overnight. The business must implement changes then experience 1,2,3 years of positive claims history proving their changes have led to a safer business to insure.