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.


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.


4 tips of inured worker outcomes

Here are 4 ways to improve your businesses injured worker outcomes.

Injured workers are a part of running a business.  If you stay in business long enough, you are going to have an incident where one of your employees is injured. This is not a bad representation of your business, but how you handle the situation can have a lasting effect on your relationship with your employees and your insurance company. Here are four ways in which you can manage and incident where you have an injured worker that are best for your injured worker, your business and the insurance company you partner with. 


Take care of the injury, first and foremost

This is simply the right thing to do. The best way to improve injured worker outcomes is to first deal with the injury.   Taking care of the injured employee is also the best thing to do for the insurance companies to help get the injured employee the best medical care and it can help the medical professionals treat the injured employee quickly and cost effectively. 

Report the injury to your agent and carrier

A lot of business owners may not think it is so, but your insurance agent and carrier are on your side. It is in their best interest to help your business and to help your injured worker get the care they need and get back on the job as quickly as possible. They deal with these situations a lot. They can navigate the workers’ compensation system much more effectively than you can. More important than anything is the fact that they cannot help you with these injuries until you notify them an injury has occurred.  Also, documenting the injury allows your business and the carrier to keep track of your claims history. If there tends to be a pattern of injuries, you can address it and the carrier can help you. They interact with business owner across the country in all industries. Chances are they have dealt with a similar situation and can give you some guidance as to how to prevent/fix the problem from continuing to occur. 

Keep your Agent in the loop

Remember your independent insurance agent is on your side. At least they very well should be.  If for instance, you feel your carrier may not be living up to their responsibilities the agent can speak with the carrier on your behalf. Agents interact with carriers very frequently for a number of reasons. They have an established relationship with these organizations and they can more easily get your claim in front of the right person to most effectively solve your problem.   Also, they can only help you when they know an incident has occurred. The longer you go without getting them involved in a claim the more likely the claim is to get out of hand. This means more missed time for your injured worker, a larger cost to the insurance carrier and probably higher rates on premium for you in the future.  Keeping your agent involved can help prevent all of this from occurring. 

Let the carrier take care of the billing

Do not try to take care of the billing yourself. Even if you have been in business for a long time and you think you know the workers comp system fairly well. Things change. A medical facility that you have been taking your injured worker to for years may stop a relationship with your carrier. If you take the injured worker to a medical facility out of the carriers’ network, you may be liable for the costs. The network for workers’ comp is not necessarily the same network for health insurance, even if you use the same insurance company for both policies. It is always best to let your insurance company do what they do best.  

Workers Compensation Fraud

Fraudulent Workers Compensation Claims – How to Defend Against Them

Over the course of 10 years writing workers compensation insurance, throughout the country a very common conversation I have with business owners is “that claim was fraudulent”.   For the most part the explanation I am given seems correct, but the story is only one-sided.  For that reason, how can I fully agree with the business owner. Fraudulent or not, workers compensation claims cause the overall cost of the coverage to increase almost immediately for the business owner.

One solution rarely thought about is requesting your company loss runs periodically throughout the year. Some business owners are so disconnected from their employees that claims are filed without the business owner knowing what really happened. I have personally insured a business that suffered a $180,000 fraudulent claim and the business owner didn’t realize the injury was serious. Certainly not serious enough to amount to $180,000 in medical costs, compensation and the attorney fees. From my perspective I have to ask:  How do you not realize a fraudulent injury occurred, that has a large effect on your insurance cost, until the increase happens? As a business owner, by requesting your loss runs periodically you can monitor 2 very important things. 1. Which employee filed a claim?   If the claim is fraudulent then you can catch it early enough to attempt to fight the claim being paid. 2. Has the insurance carrier properly closed the claim? When claims are “open” the insurance provider typically sets aside an amount in a reserve account. This amount is for just in-case the claim pays more.  For example, if someone hurts their back, goes back to work and re-injures their back.  This is what the reserve amount is for.  The reserve amount counts against your claims history until it’s closed.

Another solution is having the same supervisor, foreman or key employee being responsible for handling all claims. One of the best solutions I have ever heard was a nursing home. This nursing home required all injured employees to report to their claim to one supervisor.  That supervisor was required to write the report, drive the employee to the doctor’s office and listen/report the information relayed to the doctor by the injured employee.   By doing this the story has been told twice with the same details and reported by the medical professional within their file. Almost all of us have smart phones that allow the supervisor and employee to take pictures or video the interview if needed.

The easiest solution to avoiding fraudulent claims is creating a safe work environment. Safety within the workplace and enforcing those requirements are the easiest way to avoid claims. A great first step is to have the business owner, supervisors and key employees almost always present when the employees are working. As the business owner you need to show the employees you care and appreciate them.   Reward employees for long periods of time where 0 claims occur. If at all possible, develop a return to work program. By creating a return to work position, with light duty the employee is motivated to return to work quicker and reduces the overall cost of the claim.   Your workers compensation provider can assist with setting up a return to work program.  Ask them for assistance and documentation for setting up a program, make sure you input into your employee handbook.

Attention: You’re facing a nonrenewal.

Your current insurance policy is being non-renewed due to….

You may have received a notice that starts, sounds or maybe feels something like the title above. Insurance cancellations, despite popular belief are actually more common than you would think. They are very serious and should be responded to with action swiftly, but they are not always an awful “kiss of death” from the insurance industry. Some business owners I have worked with seem to think this is so. On the other side, it is something you need to respond with action to regardless.


We will discuss today most common insurance non-renewal or cancellations we see and how you should respond to the scenarios:


 …..Your reason for nonrenewal for underwriting reasons


What? Are you kidding me? Yes this is by far one of the most vague reasons, but more common than you think and as an insurance agent this tells me basically no reason why you are facing a nonrenewal. Generally this does mean one of two things. Either something about your operations (claims history, etc) or something in particular about your business makes the perceived risk for the insurance carrier less than satisfactory in their review. It could mean the company has changed their underwriting guidelines as a whole, which just happens to mean your company doesn’t fit with their strategy. Simply put insurance companies generally know what their company is good at and what they are not. Some insurance companies prefer to write roofing companies, but wont write clerical offices. many are just the opposite. Most companies fall in the middle which is why this becomes very common.

For Example: Transportation claims have been a leading cause of claims for several years, especially relating to workers’ compensation insurance. As a result in the last few years several insurance carriers who in the past would write these types of accounts have now decided they were no longer offering coverage for companies in your industry or class code. For some insured’s its no surprise when their claims have shown them good reason for this, however some trucking companies who have done well at controlling claims would see non-renewal notices for this type of reason. They were not seeing the non-renewal because of their claims or experience, but more because of the industry as a whole not performing well. This can be discouraging for these types of clients. Clients who take pride in controlling their claims and being very marketable risks to insure. These are the types of clients who need an experienced insurance agency on their side. Preferably one with several market alternatives to move to when this happens.

            What to do?

Discuss with your independent insurance agent what other carrier options are available. Start this process soon so you can make an informed decision on the direction you want to go without being pushed into a last minute decision. Requesting claims history reports and Experience rating worksheets from companies you have been insured with for the last 5 years is a good start as most companies will need this in order to quote.



Nonrenewal because Agent is no longer representing this insurance carrier…


Insurance companies and agencies have contracts come and go fairly often. More often for some agencies than others. This doesn’t mean your agency is not a good agency or that the carrier you are insured with is not a good carrier to do business with. It just means that one or both of those parties have decided they are not the best partnership at this time. This decision has absolutely nothing to do with you as the business owner with the exception that you are part of the pool. Agents within the industry call this the agents “book of business”. Sometimes, for one reason or another, the agency or carrier has decided that the partnership does not fit one o f their needs at this time.

            What to do?

Decide who you like more. If you have not been happy with the agency, call another agency. Especially one who has access to several commercial markets. A lot of times your policy could be moved into another agency book with a just few forms signed.


If you like the agency more than you like the carrier, discuss with your agent the alternatives they have to offer so a replacement option can be found well in advance of your renewal date.



Nonrenewal due to Claims or Non-Renewal Due to payment history issues


Don’t be discouraged. We all have set backs and things come up with payments. Insurance claims are the reason we buy insurance. These statements are not to enable you to continue on your path, don’t beat yourself up, but action and change is needed in these situations. Otherwise you are going to see the same situation in the future.

           What to do?

Nonrenewal due to payment issues are a sign that you want to look at things. You might have an accounting back-log or issue that’s delaying your payments (Fix the back log issue and prioritize making payments on time).  You might have cash flow issues from high accounts receivables (manage this aggressively-maybe even consider outsourcing to a collections agency if need is to that extent). Your sales are just low throughout the year or part of the year (work to improve sales or drive down costs more aggressively-most importantly budget for your known operating costs like insurance). These are the most common reasons we see cancellation of insurance. The seriousness of this issue extends into all aspects of your business and is a reason why several studies point to poor accounting practices as a leading reason why many small businesses fail.


A Non-Renewal due to claims do happen often. There is really no one answer to how to handle these because the scenarios are always different. Some carriers are more aggressive than others. Some are more reactive while others are more proactive. This is really where having an agent that understands these differences in carriers is vital to helping diagnose the best game plan for your business. For instance, if you had one claim that blew up into a much bigger issue and you have made the necessary corrective actions, most of the time that is not going to be hard to overcome in finding a competitive replacement for coverage.


But when you have shown a trend of several claims, either big or small, corrective action must be taken. If these incidents have similar reasoning than from the carriers perspective it may point to poor claims management. If sufficient corrective actions have not been made than the claims are likely to create the same or worse problems for you in the future. These types of issues must be addressed or the problem with claims and obtaining insurance will get worse over time.


Overall a nonrenewal of your insurance should not be taken with a grain of salt, but are also not a reason to close your business. The issues are sometimes within your control and many times they are something no one could prevent. The key to is to manage and react promptly. Get past the problem with a well thought out game plan. The help of a good agency is crucial to deal with these problems for your business.