Many business owners such as yourself don’t have control over their workers’ comp rates, almost as though you're being punished for trying to keep costs to a minimum. It’s infuriating (to say the least). If you’re part of a high-risk business, it feels like lowering workers’ cost premiums is impossible.
Thankfully, it’s not. You can control and own the cost to keep your workers’ comp premium down. You don’t need to be like Hudson in Aliens yelling, “It’s game over, man!”
ReNu Insurance Group has been showing business owners how to own their insurance, helping in areas such as risk management to minimize injuries in the workplace. We’ve worked with businesses looking to reduce their workers’ comp premiums.
In this article, you’ll learn about six proven ways to reduce your workers’ comp premium so your business is safer and you’re not paying more.
Three-year look back affects the cost of your workers’ comp
Your workers' comp modification factor directly affects your premium. The formula involves looking back three years. A particular claim costs 300% more than the actual cost because you’re stuck on it for three years. Now, imagine you have more than one of these claims. Your costs can dramatically increase.
Not to mention, people are getting hurt. Remember: it’s all about the people. If you keep your workers safe, the morale among employees is higher, and you have a happier workplace. In return, it saves on your workers’ comp costs.
Remember: workers’ comp pays in two ways
- Medical – The medical bills need to be paid. There isn’t a statutory limit to a claim. You keep paying until that person no longer needs medical pay or the claim has been settled.
- Indemnities – If the worker can’t show up due to an injury, they’ll still get paid.
1 – What information is being provided to an underwriter for your work comp?
Make sure your broker is telling the right story to the underwriter. Is how and what you do being conveyed correctly? Is the information given as good as it should be? Have you given the information on how strong you are in risk management safety?
You need to tell the right story. If what you’re providing isn’t sufficient, you need to be able to get there.
Are you in a state where there is competitive pricing?
Not every state offers competitive pricing amongst insurance companies for workers’ comp. If you’re in one of those states, ensure you’re giving yourself the best foot forward by telling the right story.
2 – What do your safety and risk management programs look like?
If you’re not strong in risk management and safety, you need to be.
Are you talking to your workers often about work safety? What data do you have to look at to determine where your losses are coming from?
What’s your DART rate? Because OSHA monitors the amount of time your employees are out due to work-related injuries. Are you prepared to answer questions from an OSHA inspector?
When accidents happen, update your risk management program and put it into practice. That way, certain work-related incidents are less likely to happen again.
Or, God forbid this was to happen, what if there was an incident where one of your workers lost an arm on the job? You’d want to do your best to ensure something like that can never happen again.
If you don’t tackle the issue head-on in your safety programs, expect the accidents to happen again. The cost of your workers’ comp premiums will only go up until you put the safety into practice.
Increase the quality of the training and really emphasize your safety protocols.
3 – Optimize Workplace Safety with a focus on Job Hazard Analysis
Understand your job hazard analysis. If your business is manual labor intensive, you want to hire a person who can handle the work without exposing themselves to injury. You want to make sure they don’t have some sort of soft tissue damage they would inherit. Or maybe that person with shoulder damage will go on your workers’ comp policy.
4 – Have a Drug Free Workplace
If you’re not following this, you need to be.
Having someone intoxicated and in the wrong headspace makes that worker prone to hurting themselves, hurting other people, or, in the worst-case scenario, getting people killed.
It’s dangerous enough when someone is driving drunk outside the workplace. Imagine how much more of a liability someone would be operating heavy equipment, working on a roof, transporting hazardous material, etc.
5 – Is your business classed correctly?
Around 35 states use the National Council and Compensation Insurance (NCCI) system, which aggregates loss data, determines which class you’re in based on the hazard of an industry, and figures out what can be charged.
Workers’ comp is determined by payroll, or “remuneration.” You take your payroll times the rate to get your premium. Depending on the class of business, that’s how your rates move.
The cheapest rate is around $0.17 per $100 on payroll for a clerical office worker. Compare that to something like a roofer, which is around $14 per $100.
6 – How is your return-to-work program?
Think of someone got injured on the job and isn’t able to do what they were initially hired and trained for. Thankfully, they can do something else less labor intensive that would have them back in the workplace. This limits the indemnity payment since you’re paying them to return to work.
We’ve found that employees not in a return-to-work program are roughly ten times more likely to file a lawsuit or become disgruntled. That is an enormous headache and a hole in your pocket you don’t want to deal with.
Surprise 7 – Maybe the Workers’ Comp policy is the problem
There’s also the possibility you’re doing everything correctly and have a small number of claims. Yet, you’re paying tons of money.
Sometimes, having a guaranteed cost in a traditional policy can be the source of the problem. Many insurance companies won’t let you know the solution they provide isn’t optimal for your business.
There are other options you can consider, such as Captive insurance companies. If you’re not familiar with a captive insurance model, you need to read our article on the differences between Captives and Traditional insurance policies. ReNu Insurance Group understands the intricacies between these types of policies.
Don’t be afraid to contact ReNu Insurance Group to talk to an insurance specialist for any questions you might have.
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