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California Business Owners Trying to Avoid Workers Compensation Insurance

California has the most expensive workers’ compensation rates in the United States. California Workers Compensation premiums can be so expensive that business owners try to find creative ways to avoid paying workers compensation insurance for their employee labor. The common practice is turning employees into 1099 contractors with the thought that since they are no longer employees the business owner is no longer responsible for workers comp. Business owners have to be very careful when doing this. State Compensation Fund sends a document with all of their quotes defining a true Independent Contractor vs a 1099 that is technically an employee. Some of the determining factors laid out by SCIF to determine if the 1099 is an employee or an Independent Contractor:

Does the business have the right to direct and control? If yes, 100% Employee.
If the trade requires a license, Independent Contractor must have their own license. Employees use the business owner’s license to complete the work.
Who provides the instruments/tools to perform the work?
Has the Independent Contractor chosen the burdens/benefits of self-employment?

Another commonly used band aid business owners try to implement to avoid paying california workers compensation insurance premiums for employees is to give the employees a percentage of ownership then exclude them from coverage by having them sign the appropriate exclusion form. California business owners commonly give employees 1% ownership then exclude them from coverage to avoid paying workers compensation insurance. The state of CA has passed a new law effective 01/01/2017 that now requires a minimum ownership percentage before a CA business owner can qualify to be excluded from workers’ compensation insurance. Effective 01/01/2017 California business owners must own at least 15% of Corporate stock to qualify to be excluded. If a business owner meets the 15% minimum, they must sign the appropriate workers’ compensation exclusion form and file it with the insurance company.

All existing Corporations with a workers’ compensation policy must sign a new exclusion form with their insurance company by 01/01/2017. Otherwise the insurance carrier must INCLUDE the business owner from 01/01/2017 until a new exclusion form is signed and filed with the insurance provider. It’s best to circle back to your insurance agent to gather the updated exclusion form. If your insurance agent is not aware of this rule change or how to solve the problem, look for another agent such as myself. Workers Compensation Insurance is typically your biggest insurance expense, you deserve an agent that understands this type of insurance.

Commonly Misclassified Workers Compensation Class Codes

One of the most misunderstood and difficult parts of setting up a workers compensation insurance policy is classifying the type of work being done by each employee. With over 700 classifications there are a lot to choose from and some of the wording on the classification descriptions can be misleading. In most states, the classifications are written by the National Council on Compensation Insurance (NCCI). These class codes are one of the most important parts of the workers compensation policy, because they are one of the two driving factors in price or premium. The other factor determining what a business pays is the amount of payroll for the employees of that business. If the employees are not classified properly, there is a chance that upon an end of term audit for a significant difference in rate between the classifications. This can cause either a large increase in premium owed, or a refund because too much has been paid into the policy. Here are some examples of my experiences with some classification codes that are commonly misused. Hopefully this will help you as a business owner more effectively classify your business with the proper workers comp codes.

Class Codes 5606

Contractor – Project Manager – Construction Executive – Construction Manager or Construction Superintendent

In my opinion, this classification is one of the most misused of all 700 codes. This classification is designed for an employee who is in charge of a construction project, but the employee does not take part in any of the physical work whatsoever. They also cannot have direct contact with the employees doing the work. They must be talking with the foreman who then will line out the work to be done by the employees on the job site. This position is mostly work being done in the office, but occasionally will include going to the job sites to check in with the foreman’s.

Class Codes 5437

Carpentry – Installation of Cabinets or Interior Trim

Carpentry is one of the commonly mis-classified class codes when it comes to general contractors. General contractors cannot separate out this classification from other work being done. Even if the other work was done weeks prior, the contractor still cannot use this classification. It will default to the classification that has the highest risk for the work done at the job site. The higher risk typically has a higher rate of premium. This particular classification is designed to be used by an artisan (specialty) contractor. This is someone whose scope of work is only doing the installation of cabinets or trim inside of the structure. This person is not doing any other type of work on the building. It is a very specific classification and the rate for this type of work is much less than all the other construction classifications. For this reason, if a business is using this classification and it is incorrect the business will owe a very large amount at the end of the term after an audit.

Class Codes 8810

Clerical Office Employees NOC

Clerical employees are typically one of the least expensive class codes. This is for a good reason because the chances of someone sitting behind a computer being injured is very small. Since it is the least expensive classification, it is common that business owners try to classify as many of their employees as they possibly can with this code in an attempt to reduce cost. The biggest requirement for this classification is that there has to be physical separation of the clerical employee from the other work being done at the location. This separation can be a wall or even a reception desk. The other caveat of this classification is that you typically cannot use this in conjunction with any other classifications. People within the insurance industry refer to this as a standard exception class code. The standard exception class code means the employee cannot be doing any other class of work. You cannot have an employee who is classified as 5437 (trim carpenter) and then have the same employee come back into the office to be assigned class code 8810, which is a less risky class code. Some states may have certain instances where they allow this code to be split. Missouri is one such state that allows an owner to assign 10% of their payroll to the 8810 class and the remaining to the governing code. It is important to check the regulations of the state you are operating in to make sure.

Standard Exception Class Codes

As referred to with the clerical classification (8810) they cannot be used in conjunction with any other classification. There are three of these class codes that are commonly misused in this manner, 8742 (outside sales), 8810 (clerical), 7380 (delivery). Make sure that if you are using these classifications the employee is not participating in any other aspect of work being done in the company that should be classified elsewhere.

Conclusion on Class Codes

The biggest take away from this is a business owner should verify all the classifications the agent is using on the policy of their business. The insurance agent is in the business of analyzing risk. It is in their best interest to always assume more risk. This is because it is a lot easier for the agent to explain that a business over paid. This is easier than explaining that a business under paid and now they owe additional premium. Plus the insurance agent can only operate off of the information you give them about your business. No one knows your business better than you. For this reason, it is important to take an adequate amount of time to talk with your agent. Talk with them about all of the ins and outs of your business. This will help them properly protect your business.

It is equally important that part of your conversation with your agent is to talk through the class codes. Take time to make sure the class codes are being properly assigned. You can always look up class codes online as a consumer through several different sites. Most agents will be more than happy to explain why they used a particular classification. Classifications can sometimes be very tricky and it can even vary by how a particular insurance carrier views the work being done. A little research and questioning to make sure things are set up properly can end up saving you a lot of hassle. It will also save you money upon the end of term audit. For this reason, it is important to establish a comfortable working relationship with your insurance agent.

My Insurance Question is a contribution of the experts at The Insurance Shop LLC. The Insurance Shop was founded in 2005 as an independent insurance agency that partners with a couple dozen insurance carriers. This large amount of carriers allows the agents at The Insurance Shop the ability to shop your policy around in an attempt to make the carriers compete for your business. If you are looking for a better value when purchasing your commercial insurance package, let us shop insurance so you don’t have to. Give us a call today at 800-800-4864.

Overcoming Difficult Workers Compensation Situations

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.

3 tips for effectively managing risk in the Non-Profit Industry

People go in to the non profit industry for a wide array of reasons. For most people, that reason has something to do with serving their community. Many people in the non profit Industry do not anticipate having to manage risk, but how effectively their organization manages risk will contribute immensely to the success or failure of the organization. Some of the aspects of managing risk include: developing safety programs, writing liability waiver forms, designing a return-to-work program for injured workers or purchasing workers’ compensation insurance. In order to effectively manage risk, here are three tips every Non Profit Professional should consider when determining how to manage the risks your organization faces.

Find the best info about insurance for Non Profit businesses at My Insurance Question.com

Have an effective safety program in place.

Having an effective safety program in place is essential for all non-profit organizations. First and foremost, this is simply the right thing to do. It is the right thing to do for your employees, for your volunteers and for your organization as a whole. The success of the safety program starts with the leaders of the organization. If the leaders of your organization make it clear that you value safety, the employees and volunteers will value safety as well. What an effective safety program looks like will differ depending on the scope and mission of your organization. A safety program for local soup kitchen will be dramatically different than an NGO that distributes medicine across several different countries. For that reason, it is important to invite a risk management professional to sit on your board of directors. If you do not know someone in this field you can consult with your insurance agent. They typically have generic programs in place for many different industries.

Deciding when and if your organization needs to purchase insurance?

For a small or recently founded organization, you may be able to do without insurance for a short period of time. This is not something to take lightly. No matter how little money your organization has, not securing proper insurance can lead to your organizations failure if an accident does happen without proper coverage. Eventually there will come a time when your organization will need coverage. The state you are located in will determine when you are required by law to purchase some coverages. Workers’ compensation insurance is usually the first coverage you will be required to purchase. This policy covers the risk of bodily injury to your employees. General liability insurance covers bodily injury and property damage done to third parties. These third parties may be the people you serve or anyone who comes in contact with your organization. These two policies are typically the first policies a non profit will consider and they are the bare minimum coverage. As your organization grows these two policies may not fully cover your business from all risks. You may not understand all of the risks you actually face and the types of insurance you need. Consulting with an insurance professional whom you trust is important at this stage in your risk management process. Asking someone who works in insurance to volunteer with your organization or to sit on your board is a good idea.

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

Developing an effective return-to-work program is something that can be a work in progress. Ideally your safety program works and you do not have many injuries. Even if you only have the occasional minor injury, it is best practice for your organization to have a plan for getting an injured worker back to work as soon as possible. The quicker they get back on the job the more likely they are to return to regular work and the mission of your organization. Some common jobs for injured workers include basic office work like stuffing envelopes, answering the phone or writing thank you letters to donors. Getting people back on the job quickly is important because people who work in this industry frequently have a special relationship with the work they do. Many of them want to be a part of something greater than themselves. This is especially true with the millennial generation. When these people are injured and not able to work, part of their life is taken from them. The longer it is not a part of their life, the more likely they are to not come back to work at all. This is when the cost of a claim can become the greatest and is when you can expect to see an increase in your insurance premium. Having an effective return-to-work program can help these employees get back on the job, control the cost of your workers’ compensation claim and continue the mission of your organization.

Declaration Page. What is it? Where is it? Is it important?

I am sure at some point in time you have had an insurance agent ask you for your policy declaration page or pages. If you are like most business owners, you think to yourself what are they asking me for. Basically, what these pages represent are the cliff notes of your insurance policy for that particular line of insurance. You will notice that your worker’s compensation declaration page is shorter than your business owners package or general liability. These declarations will not list all of the exclusions in your policy. It will only list the coverage limits you currently have. Here is the definition of declarations: The front page (or pages) of a policy that specify the named insured, address, policy period, location of premises, policy limits, and other key information that varies from insured to insured. The declarations page is also known as the information page. Often informally referred to as the “dec” or “dec page.”

The next thought most business owners have is, where do I find the declaration page. The declaration page or pages can be found in the front 3^rd of your insurance policy. Most of the time it’s within the first 10 pages. This is especially the case for worker’s compensation. For your general liability and business owners package policy it may be a few further pages in. The key to identifying it is when you start to see wording such as limits or premium. When you see that and how the premium pricing is broken down then you are in the right place. It will show your experience mod from the current term, premium discounts, state taxes, fees, expense constant, and a few other items on there. Some of this will vary on what type of policy it is.

This information is important to insurance agents for a wide variety of reasons. Most of the time a business owner thinks we only want to see these pages so that we can beat the price on your current policy. Yes, that is helpful information to use but it doesn’t necessarily mean that our carriers will just price it below your policy just in order to win your business. Our underwriters like to know pricing information so they can compare it to other policies that are either doing the exact same type of business or something very similar, and offer you a quote accordingly. If they generally don’t know what you are paying, then they will go on the conservative side and offer a policy that is in the average of pricing for that industry based on where they have priced and written the type of business you are doing. I feel, the most important reason for this to me is that I like to view these pages to give you an apples to apples comparison of the two policies. Also, I can check to see if you are truly covered correctly. If their may be gaps that are missing some key coverages or are underinsured in areas that you would not want to be underinsured in. Thus we can present you with a quote exactly like the one you have with the same coverage and limits. This will also enable us to present another quote option, if necessary. Typically this option is where we think your limits should be and additional coverages that you may not have that most people in your line of work have. The key to remember when being asked for your declaration page or pages is that we as insurance producers are wanting to make sure your covered correctly and at a fair price. We are here to get you a fair price, but we are also here to make sure you do not have any gaps when a claim does occur. We don’t like audit surprises or coverage gaps at the time when you think you are covered just as much as you do. The declaration page is so much more than just a price to beat.

The Importance of Accident Prevention in the Workplace

It may seem obvious that it should be the goal of employers to focus on accident prevention in the workplace. However, for those that need a little additional encouragement, here are some reasons to prioritize safety in the workplace.

Caution signs are essential to accident prevention in the workplace.

Accidents are financially expensive

Businesses exist to create profit. Most businesses are relatively low profit margin and work very hard to create that profit margin. Workplace accidents lead to extra financial expenses. They can also add costs to insurance policies through increased rates or a worse experience modification factor.

For example, if a business operated at a ten percent profit margin (which is well ahead of many businesses), they would need $50,000 in additional revenue to offset $5,000 in extra expenses created by an on the job injury. That could lead to extra hours worked by ownership, having to cut positions or hours or other difficult budget decisions.

Reduced workplace morale

There are more than just financial costs due to workplace injuries. A lack of accident prevention can reduce morale of other employees. Sometimes the morale can be reduced as a result of having to work longer hours or harder to make up for injured employees that have to miss work. It may result from financial strain on the business due to the injury. It also may arise simply because employees don’t like to see their co-workers suffer.

Recent Trends

It’s hard to argue against the importance of workplace safety. As a result, there have been recent trends by workers’ comp insurance carriers to help with accident prevention in the workplace. Carriers such as Missouri Employers Mutual, Utah Business Insurance Company and Guarantee Insurance Company offer extensive loss control services. Additionally, some carriers offered reduced cost items for workplace safety. These items include The Hartford’s Shoes for Crews incentive, incentives for a healthier workplace, weight loss programs as well as discounts on ergonomic office furniture. Missouri Employers Mutual just launched a safety grant program for their clients to help defray the costs of large one-time purchases to make workplaces safer.

Most employers want to protect their employers and focus on creating a safe workplace. Some of the reasons listed above highlight the benefit to focusing on preventing workplace accident for all employers.

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 Broker of Record (BOR) or an Agent of Record (AOR), here is what you need to know.

A BOR is a broker of record notice and an AOR is an 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.

Marketing, Financial, Insurance, Broker

Here is another scenario that may give you a better understanding of the Broker of Record (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 Broker of Record (BOR) letter.

My Insurance Question is a created by the experts at The Insurance Shop LLC. The Insurance Shop was formed in 2005 and over the course of more then a decade the agency has developed relationships with more then two dozen carriers. This vast amount of carriers allow their agents to acquire the best value when shopping for commercial insurance. If you are ready for a new look at your coverage, give us a call at 800-800-4864.

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

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.

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.

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.

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.

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.

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.