It’s expensive! Depending on the type of business you run, workers compensation insurance can be very expensive. If your business operations are in the construction industry then you really know what I mean! An employer can be easily enticed by promises from those promoting cheap workers compensation and quick fixes to problems. In fact there are no such things in the world of workers comp! Let’s talk about how and why employers fall for these schemes.
Here’s some phrases and promises to consider.
- “It’s all about the money!” – Let’s imagine that I have a business where my annual workers compensation premium runs about $180,000. I’ve been with my current agent, who by the way does a great job for me, for about 10 years. My account is a bit complicated in that I do a lot of special contract work and all my policies have special endorsements required by the contracts I’ve signed in order to get work. Another very persistent agent comes by my office and I finally give in and let them gather information to quote my account. He comes back with a quote and is excited and proud that he can save me $10,000 in premium! Now what do I do? Here I have a long, trusting successful relationship with my current agent but here’s a new guy that promises to save me $10,000! I could use that money! Ok, so I pick up the phone and call my current agent to see if he can get anything cheaper. Do I really trust the new agent? How do I know they know what I need, like my old agent does? Is it really about the money?
- “You don’t need workers compensation if you sign up for our special program, it takes the place of workers comp and it’s cheaper!” – Wrong! Workers compensation is workers compensation! BEWARE when faced with someone selling a program that’s not really workers comp. They are out there! You’ll hear a sales person touting the benefits of their program but here’s a little secret…your individual state controls the programs and insurance policies that qualify as workers compensation coverage. Buy into one of these plans and you may find youself faced with fines levied on your business by the state. When in doubt as to the validity of a program or plan call your state regulator.
- “I don’t have employees, I only use subcontractors and give them a 1099 so I don’t need a policy.” – Really? Who, by now, doesn’t understand the relationship between a contractor and subcontractor, especially uninsured subcontractors? Am I blue in the face yet? Every time I hear this phrase I cringe because I know what’s coming next..”and I don’t understand why my insurance company sent me a bill for $40,000!” That phrase could easily be replaced by…”and I don’t understand why I got a $50,000 fine from the state workers compensation board!” Hmmm could there be a relationship? Ya think! So here’s the scoop. If someone tells you you don’t have to have a workers compensation policy maybe you should check it out with your states regulatory authority. Just one more phone call could save you a ton of grief!
- “Join our association and you can get into our cheap workers compensation plan.” – Remember above when I said your state controls what qualifies as proper coverage in your state? Well, most states review and approve special association plans for members of a group. They can be a good thing for an employer. But here’s where it gets just a little sneaky. Many association plans are designed around a special association plan agreement that the employer is required to sign to participate. Have you ever read one? What about the part that when signed you agree to abide to the rules of the plan, which maybe outside of the normal statutory rules and protections? We recently worked a case where the employer signed up for an approved Builders Association Plan and at audit was presented with a very large ($40,000) additional premium bill because separation of labor and materials from subcontractors was not permitted under their plan rules. Was this a good move for the employer? Maybe not.
Why do employers fall for schemes? That’s a hard one but consider this…
- The grass is always greener on the other side.
- I’m paying too much.
- There must be a cheaper option.
- If it sounds to good to be true…
- Could it really be human nature?
The take away. Just be careful. Knowledge is power when it comes to most all things and things that go round in the world of workers compensation are no different. When faced with options be sure to check them out. And when it comes to workers comp issues ask an independent consultant for help!
Hope this helps you out! Thanks!
