For many businesses, workers compensation is a substantial expense. Because insurance companies use claim history to measure risk of future claims, injuries on the job today can affect workers compensation costs in the future. However, by properly managing workers compensation claims, a business can reduce this impact by 70% right off the top. That isn’t a random number, but rather the impact of workers compensation claims that are resolved within seven days is reduced by 70% when future insurance costs are calculated.
Consider the case of two similar work-related injuries, occurring to the same person, working for the same business, protected by the same insurance company. If the first claim is resolved within ten days and the second within seven days, the second will affect future insurance premiums 70% less than the first. This is true in all states where the National Council on Compensation Insurance (NCCI) manages the workers compensation program, which is most. The difference is because payments for lost wages (indemnity) begin after seven days in most states, and claims that pay only medical expenses receive a 70% credit when applied. The key is keeping a claim medical only. Quickly resolved medical-only injuries receive this credit because they have a much lower chance of turning into protracted claims with long-term costs.
Reducing Work Comp Claim Time
The best offense is a good defense. Avoiding claims altogether is first priority when strategizing how to reduce the length of time workers compensation claims remain open. Injuries where businesses maintain a strong safety culture and an established safety program tend to be less severe and close faster. We suggest each business consider implementing:
- Safety program: Establish a formal safety program for the business. Safety programs will vary based upon the risks faced by each business and within the industry. Bankers Insurance provides our clients a subscription to MyWave which includes up-to-date safety manuals for many industries that can be tailored and adopted as needed.
- Tool box talks: A safety program is ongoing. Toolbox talks are a practical way to nurture a safety culture, keep safety top of mind, and express care for employees.
- Employee screening and training: New employees should be screened prior to hire, ensuring they are able to perform the tasks of the job. All employees are to be trained on new job functions, equipment, and familiarized with safety features.
- Risk management: Each business should consider their operations objectively and take action to avoid or reduce risk where possible. Ask your insurance agent for a risk analysis or your insurance company for a risk inspection to determine other unseen threats.
- Claims management: Actively manage workers compensation claims. Reference The Art of Overcommunication | Managing Insurance Claims
Return to Work Program
Once a claim has occurred, an active, managed return to work program is an effective means to reduce the time an employee spends away from work. Injured workers understand business operations and are often able to fill other needs by returning to payroll early, operating in a different capacity. Even if the injured worker is only partially productive during this time, their payroll and benefits represent a lower cost than the accumulated impact such a claim will have on future workers compensation costs, largely because claims affect workers compensation pricing for three years. The difference can be staggering.
But a return to work program must be established ahead of time. Consider what work duties could be performed by injured workers and have them ready when appropriate. Clients of Bankers Insurance can access extensive return to work planning resources through MyWave. Simply log in to MyWave and search for “Return to Work”.
- Sample: Return to Work Program Guide
- Also Reference Control Your Workers’ Comp Costs! | Return to Work
- Ask your insurance agent. Contact Us
Benefits of a Return to Work Program
- Communicates value: A working employee feels valued for their contribution to the company. A nonworking employee can feel disconnected, devalued, and their claim is more likely to become protracted.
- Increases employee engagement: An engaged employee feels supported and wants to get back to work.
- Speeds return to full productivity: Staying active at work, even in a reduced capacity, speeds full recovery.
- Links to work: Employees remain connected to their workplace and are less likely to seek employment elsewhere, decreasing employee turnover and associated costs.
- Decreases disability (lost time) costs, potentially removing them altogether.
- Self-corrects claim abuse: In the rare case an employee abuses the work comp system, a return to work program protects the employer. Such cases tend to move on, seeking less engaged employers.
Remember that workers compensation claims affect future costs for three years. These claims typically do not affect work comp premiums on the immediate renewal, but the three-year period following that. Thus, a claim’s affect is not one time, but rather the accumulation of several years. In addition, several small claims can have just as much, if not a greater, effect than a single large claim. Read more on how to Take Control of Workers Compensation Costs.
Questions regarding a return to work program or workers’ compensation insurance? Contact your Bankers Insurance agent. Not a client of ours? Let us earn your business! Each client is assigned a personal agent in our office, given their email address, and provided a phone number that rings right on their desk.
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Good info. One comment: Something I’ve noticed over the years is that WC insurance is based on PAYROLL, not number of full-time workers. This results in a conundrum for employers like myself: if I pay employees more in order to attract/retain top talent, my WC premium goes up since it’s based on gross payroll for tree work (0106). So if I pay less in order to save on WC premiums I’m going to have mediocre/sub-par employees. From my perspective, why isn’t there a flat rate for WC for a full-time employee? This would encourage me to hire the very top/best talent out there without costing me a prohibitive dollar amount for WC. I can’t afford paying an excellent FT employee over $50 per hour because with a commensurate increase in WC premium premium my company is not as competitive in pricing. So, in this scenario, even though I pay well, I would like to pay more but can’t afford the concomitant increase in WC premium for that employee. Ultimately the industry as a whole suffers, because I can’t afford WC if I hire the best of the best workers because I’d lose bids where contractors, municipalities, etc., get 3 bids and are required to go with the lowest-priced bid.
Tim, you present a great case for a system-caused issue. And you aren’t alone in this. Roofers, miners, and other businesses where workers compensation expense is a larger percentage of payroll are in the same boat. There are a couple classes of business where work comp is charged based on number of employees, but as I recall they are for volunteer fire departments and similar where no payroll exists. It certainly isn’t a perfect system, and it uses payroll to approximate activity, because activity is what drives risk. Ideally, work comp expense would somehow be calculated using a combination of payroll and headcount. All that to say, you’ve got a solid point. But with work comp being state regulated, I don’t see this changing in the near term. However, there are always other means to help reduce work comp expense. I’ve passed along your comments to your sales executive who should be in touch to discuss in the near future. Thanks so much for taking the time to read and comment, for being a client, and for trusting us as our agent. All the best!