Workers compensation insurance continues to be expensive, and its premium is rising faster than any other liability insurance costs. Although rates will vary, they can range from 5-40 percent of payroll. Increasing risk factors such as aging workforce, rising medical costs, opioid abuse and growth in the economy may make the situation even worse. Fortunately, there are number of tactics to reduce workers compensation costs.
Lets first understand how your workers compensation premiums are determined by your carrier. Workers compensation premiums are primarily calculated based on following 3 factors: a) Payroll, b) Rate, which is based on your industry classification, and c) Experience Modifier, representing your company's loss history compared to that of the industry your company is in. Your business has little control over the loss experience of your industry or the rates assigned to your classifications. Nevertheless, you can work to reduce your premiums by taking steps to lower your modifier.
Here are the top strategies to do so:
1. Establish a proactive Return to Work (RTW) Program: This program is designed to help injured workers return to the workplace as quickly as they are medically able to. Successfully modified work programs can reduce workers’ compensation costs by eliminating time lost from work.
2. Control Recidivism: Create programs for monitoring workers’ transition back to work. Make sure resources are in place for employees to ensure recovery is optimized and re-injury is avoided.
3. Investigate All Injuries and Illnesses, even though minor: It is important to note that the Experience modifier is more sensitive to the number of claims (loss frequency) than the dollar value of claims (loss severity). Insurers know from experience that where more accidents occur, there is a greater likelihood of big losses. Your ability to reduce accidents is significantly enhanced when those accidents are fully investigated instead of simply being reported.
4. Develop Programs Required by OSHA Standards: The OSHA standards provide a good pathway to incident reductions. Experience shows that companies with thoroughly developed OSHA-compliant programs have fewer accidents, and hence lower workers’ compensation costs.
5. Focus on Competency and Safety Training: Training plays a significant role in safety and in reducing workers’ compensation costs. Competency training helps develop competent people who have the knowledge, skill and understanding to perform assigned job responsibilities.
A competency-based safety program lowers accidents, and fewer accidents lower workers’ compensation costs.
6. Recheck employee classifications: Each job classification code is associated with an assigned level of risk necessary to perform the job. Assigning job codes that have more risk than your employees actually face can unnecessarily lead to higher workers’ compensation insurance.
7. Time-of-Hire Considerations: Ensure that every effort is made to ascertain that new or potential hires are physically capable of handling the requirements of the job. A new or potential hire should also be mentally capable of understanding and consistently applying safety training, procedures, and protocols.
Bundled together, these efforts can make a big difference on your workers’ compensation premiums. Contact us to learn know more about these measures and its impact on your workers’ compensation premiums. You can call us on 800-903-8690 or 972-293-2139 or contact us online here.