Tag: Comp

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.

What exactly is the “Exclusive Remedy”

Exclusive Remedy

What is the exclusive remedy for risk management and small business professionals?  In the world of insurance, the term ‘exclusive remedy‘ refers to the workers’ compensation system.  These systems are administered by the sate governments of each individual state, not the federal government. In most states, this grand bargain began around 100 years ago.  It was an agreement between employment and labor during a time when many employers severely abused the rights of workers. As a result of these abuses, many workers were beginning to unionize.  In an attempt to keep both sides happy, most states created a workers compensation system to deal with both medical benefits to employees and protection from most lawsuits for employers.

workers-compensation-insurance-is-the-exclusive-remedyThese workers’ compensation systems are administered by each individual state and not the federal government. Because of this, each state provides the system a tad bit different.  Wisconsin was the first state to administer a workers’ compensation system in the year 1911. Mississippi was the last state to come around to the exclusive remedy in 1948.

 

workers-compensation-forms-aid-the-exclusive-remedyThe term ‘exclusive remedy‘ came about because the benefits that are provided under the workers compensation system are supposed to be the sole remedy available to employees injured on the job. The benefits to employees are, they have the confidence to go to work knowing that if they are injured on the job they will have their medical costs covered and some lost wages. Employers benefit from the system by having most lawsuits taken away for injuries that occur as a normal part of business operations. Businesses are not covered for injuries that are caused by the intentional actions of the business and its management. This includes decision-making or neglect by the business to operate the way in which they do business in safe conditions.

Workplace-Safety-Toolkit-Exclusive-RemedyAs time has passed and work environments have changed so has the opinion of many in the business community about the need for an exclusive remedy in todays’ business climate. A few states have removed workers compensation as a requirement for some types of businesses. A few other states have proposed the idea, but are still in a wait and see approach. At this time Texas and Oklahoma re the only states to implement what is referred to as an Opt-out program. This is a program where if the business qualifies they can elect not to carry coverage and provide an alternative to what most states give through the workers comp exchanges. Both have in place certain minimum standards that are similar to those standards required under most workers compensation systems. Opponents of these system frequently critique that there are very strict reporting policies put on the responsibility of the employee. In the system set forth by Oklahoma employees must report the injury to management within 24 hours or they may not be eligible for coverage. Most states are sitting in a wait and see approach and depending on the success or failure of these states will determine the future of the workers’ compensation system.

 

 

Underwriting and What It Means to You

I have taken many calls from business owners in search of Work Comp. I would like to say that I have always been able to help. One common exception is when a business can only purchase coverage through the assigned risk pool and the truth is there are many businesses who have no other option.  Assigned risk is outside the volunteer insurance market.  Underwriting these industries is risky for the carrier and that makes it extremely difficult for an agent to find a carrier willing to quote the business.

Insurance agents typically interact with a minimum of 20 workers comp clients per day.

What ultimately puts a business into the assigned risk pool is what is called, underwriting guidelines. What can sometimes be a hurdle is explaining to potential clients that I am not the underwriter. I ultimately do not have the say on if a carrier will take on a particular business (risk).  What makes a business a “risk”, whether it be a high risk or a low risk, is determined by the underwriter with the insurance carrier. There are many factors that determine if an insurance carrier will take on the risk of you and your business.

Insurance Underwriters research and assess the risk each prospect presents. Get all of your questions about underwriting answered at myinsurancequestion.com

Underwriters also research and assess the risk each prospect presents.  This helps to create the market for securities by accurately pricing risk and setting fair premium rates that adequately cover the true cost of insuring policyholders. If a specific applicant’s risk is deemed to be too high, underwriters frequently refuse to cover it.

The most common reason a business is declined coverage on the open market is due to the business not having enough payroll for the exposure. Most construction businesses are going to need between $20 and $30k in payroll to be offered coverage by a carrier on the open market.  Many of my potential clients ask me to just quote with $25k in payroll so they can get the policy they need.  However, the policy will most likely be cancelled in a year due to not enough payroll or premium too small for risk.

The next reason for a business to be declined is because of 1099 or sub exposure. I should say that the amount of sub exposure to w2 employees makes a difference.  Most carriers want no more than 20% of sub or 1099 employees.   Just because a business has chosen to issue 1099 rather than W2’s does not automatically mean the employee is an independent contractor and should not have rights to work comp coverage. Many business owners assume that they do not have to provide coverage for the subs however if the sub or 1099 is not providing a Certificate of Insurance to the contractor or business owner, than the payroll will be picked up at audit. because of this the policy owner will owe in to the carrier for that employee.  Ultimately what carriers worry about most with the subs is if there was a lapse of coverage the contractor would be on the hook for any claims that were to happen.

If I had to pick one other reason for a business to be declined coverage it is because of travel exposure.  By travel exposure I mean using a vehicle to do work related to the business. Carriers deem this a larger risk because when the employees are driving there is a higher rate of claims and the claims tend to be more severe.  It seems these days’ contractors need to go where the work is.  If there is multi-state exposure where employees are traveling out of state or live near the border of two states, that is something that many carriers are not interested in writing.  For instance, if a contractor sends 5 or 6 employees more than 50 miles away to do a job and they all ride together that is 5 or 6 claims that would have to be paid if they were all riding together and were injured in a car accident.  Many employers think that while their employees are driving to work they are not covered under an employer’s work comp policy.  That is accurate if you drive the same route to work every day and generally go to the same place every day.  However, if you as a business owner send your employees on jobs that in tails driving exposure. The driving exposure is anything that would not normally be a part of everyday work. If the employee is solely driving for the reason of doing a job then the insurance carrier would indeed need to pay for the claims that arise out of a car accident.

Insurance is the most common example of underwriting that most people encounter. In order for insurance to work well, risk has to be spread out among as many people as possible. Underwriting helps insurance companies manage the risk that too many policyholders will file claims at once by spreading out the risk among outside investors. Once an underwriter has been found for a given policy, the capital the underwriter puts up at the time of investment acts as a guarantee that the claim can be paid.  This allows the company to issue more insurance to other customers.  In exchange for taking on this risk, the underwriter is entitled to payments drawn from the policyholder’s premiums.

Long story short the 3 reasons for businesses being declined by an underwriter are not enough payroll, too much 1099 or sub exposure and too much travel exposure. These risks are just a few that could result in your business being placed in the Assigned Risk Pool.