What can an employer do to reduce the cost of their comp program? It really boils down to following the basics. Here’s 5 steps any employer can follow to improve their program.
1. Verify Classification Codes. The class codes on your policy identify the type of work, service, process and/or product you manufacture, develop, sale, distribute or provide. Each code carries a different rate per 100 which is used to calculate your premium. The use of correct codes is paramount to the accuracy of your premium. Mistakes or errors with class codes can lead to thousands of dollars in overpaid premium. It’s important to verify that correct codes are being used on your policy. Because of the complex nature of the code system most employers will not be able to verify codes without outside help. So contact an independent workers compensation consultant for assistance with an independent code review.
2. Prepare For An Audit. Workers compensation policies are auditable. That means the estimated payroll you provide to your insurance agent or broker at the beginning of the policy will be used to calculate your policy then after your policy expires the insurance company will audit your books for actual payroll incurred. Your policy will then be adjusted based on the actual payroll and you will either owe an additional premium or be returned overpaid premium. It’s important to have all your ducks in order at audit time. A good bookkeeping system, one where payroll is organized by employee by class code, with a description of the work performed will make the audit process go smoothly. If you used subcontract labor make sure you have current certificates of insurance as proof that your subs had workers comp coverage. Make sure to have an officer of the business meet with the auditor, someone knowledgeable about the separate job functions of your employees and can explain in detail your business operations. After an audit is complete have an audit review conducted. This will be your assurance the audit was completed correctly and that you were not overcharged.
3. Develop A Safety Program. With experience rated policies you’ll find that claims incurred are directly reflected in premium you pay. It’s very important to institute an active safety program. Reduction of claims will have a significant impact on the cost of your policy. Current changes in the calculation formula of experience modification rates mean that claims will have an even greater impact on premium. An active safety program, one that includes accident investigation, return to work provisions and claim reserve reviews will have a positive effect on claim situations when they occur. Reduction of dollars spent while providing proper medical and rehabilitation services to your injured worker, learning from the incident and adopting procedures to eliminate future claims is always the goal of a workable safety program. If you don’t have one, talk to a consultant about helping you set up a program for your company. Finally be sure to have an experience modification review and claim reserves review completed. Errors here can cost you additional premium paid over a period of years!
4. Learn More About Your Policy. Workers compensation policies are really pretty simple at least until something goes wrong! They become complex from several different directions. Premium issues, coverage and benefit issues along with jurisdictional issues all play a part to make the workers comp machine work. Within each of these areas lie potential hidden costs for an employer. Knowledge about your policy is power! Learn how codes are assigned, if your business is allowed to separate payroll and how to properly document that separation (not all business are allowed to do so,) learn how to set up your payroll records and be involved in the claim process. Finally, learn about the rules of your state, you can bet your insurance company knows the rules!
5. Compare Insurance Company Quotes. Don’t do this every year! Depending on the size and complexity of your account you may consider checking rates with other carriers every 3 to 5 years. Work with a good knowledgeable insurance broker and ask them to market your policy to other carriers. Don’t get crazy with this but rely on your broker to guide you on when and how to do this process. Sometimes it doesn’t make sense to try and change carriers and sometimes it does. In most situations you’ll find, different insurance carriers will charge different rates, apply different schedule credits and other credit modifiers to an account. If the account has been profitable it makes it easier to gain additional credits applied to your premium. For those unprofitable accounts it may be more difficult to secure competitively priced coverage.
There you go. Sure it’s the basics but we see clients everyday who find themselves facing serious problems that many times could have been headed off by following these simple suggestions.
If you find you are having a problem with your workers compensation program contact an independent workers comp consultant for help! You might be surprised how they/we can help!