Five Ways Employers Can Reduce Work Comp Premiums

As long as businesses operate there will be risks that need to be managed and
controlled or face the likelihood of higher insurance premiums. More to the point,
business risks are an ongoing reality of business activities; therefore, top
management must understand that a consistent and methodical process is needed to
reduce risk of loss to an acceptable level. Furthermore, if and when a loss does
occur top management should have in place appropriate response mechanisms and
policies. The following is a brief list of five activities that top management can
undertake to reduce loss potential, claims cost and therefore premiums.
1) Take charge of the risk that the business generates and understand that risk
can be reduced to an acceptable level. An acceptable level of risk is where
the risk of loss is reduced to a point where the probability of an accident or
injury is minimized. There is no substitute or alternative starting point than
for top management to commit the needed attention and resources to risk
reduction. Write down what you do and identify the hazards that are
generated from the work operations. All hazards need a hazard control
technique, often the appropriate OSHA Standard, to bring the risk of loss to
an acceptable level.
2) Develop a written safety and injury management program. Educate workers
on the appropriate hazard control techniques. For example, most companies
have vehicles on the road. On average, three workers die everyday from
motor vehicle accidents. While there is no current OSHA Standard, there is
ample safety information to improve driver selection and driver safety.
OSHA does have many Standards (Hazard Control Techniques) that can be
adopted and implemented to reduce loss potential. The incorporation of loss
control and safety programs yields many benefits to the employer and
employee. Accidents, which are negative externalities, do not bring any
value to society. Injury prevention is a humanitarian pursuit and the right
thing to do. Secondly, by implementing the OSHA Standards you endeavor
to meet your federal duty to maintain a workplace free of recognizable
hazards. Thirdly, you will reduce your insurance premiums as rates are
developed from past accident cost. Fourthly, you maintain production as
injuries are often disruptions to business operations.
3) Communicate to all stakeholders that you are a safety conscious employer.
Post a Safety Mission Statement in your lobby and mention workplace safety
in your marketing literature. Explain to your insurance agent that you want
the insurance carrier underwriter to know you are safety conscious and you
will work with them. Ask that the insurance carrier provide a safety/loss

control professional to visit the worksite frequently. The reports that the
safety professional generates are usually reviewed by underwriters who
determine pricing. Beyond the Mod, Underwriters have pricing discretion
sometimes up to +/- 25% of premium. Try to make the loss control report
favorable so the underwriter has more brush strokes to gain a clearer picture
of your operations and the controls you have activated to reduce loss
potential. This helps to predict future loss potential and set a favorably
adequate rate to cover the risk of loss at your operations.
4) Review all the data that pertains to your account. You should receive
periodic claims reports called loss runs. Review the open cases on the report.
Call or e-mail the claims adjuster with questions and concerns. Ask about
the action plan to move the case forward. Ask what you can do to help the
adjuster close the case. Understand that insurance carriers would prefer to
not have claims and minimize case cost as claims impede profitability of the
carrier. Also, unpaid amounts, called reserves, accrue to your pricing
detriment as unspent money is included in the calculation of your Mod and
Loss Ratio. Review your Experience Modification Worksheet. Match the
Incurred Loss amounts by year with the Incurred Loss amounts on the loss
runs. Review your Final Premium Audit (FPA) for accuracy. Certain rules
apply to FPA’s that can accrue to your benefit. For example, the National
Council on Compensation (NCCI) rules are that a Work Comp carrier may
not add a higher rated class code to the policy after 90 days before expiration
of the policy. So at audit a higher rated class code cannot be added to your
5) Take screening and hiring very seriously. Control turnover of employees.
Establish a comprehensive method to recruit, screen, hire and indoctrinate
new workers into the workforce. Require employees to sign that they know
all injuries must be reported immediately. When employees separate from
employment require that they sign-off that they have not been injured. This
will help to avoid late reported and questionable claims.