4 Ways to Reduce Workers Compensation Claims for Employees
For restoration contractors, large-dollar claims can be common, and companies may struggle to find experienced partners capable of providing targeted risk control and effective techniques to lower loss results and reduce the effect on the total cost of risk.
Here are four tactics your restoration company can implement to reduce the cost of claims.
1. Understand your claims history
Effective claims management begins with an understanding of what has happened in the past followed by corrective actions to address loss trends and improve financial outcomes. For casualty lines of coverage, this process should involve:
Analyzing claim trends that negatively affect loss experience and total cost of risk.
Developing a risk control plan based on this review.
Spelling out clearly the financial improvement to be expected by implementing the recommended plan.
This process of improving safety in targeted areas can help reduce insurance premiums by up to 15 percent in the first 12 months.
Case in point: A large restoration contractor could not improve its Workers’ Compensation experience because of increased injuries from inexperienced workers. This was preventing the company from qualifying for new projects.
The company had its Workers’ Compensation claim results analyzed, and then isolated the activities and jobs that were creating the most claims. Following that, a targeted safety program that addressed the specific causes of those claims was designed and implemented.
This effort reduced the company’s annual claims by more than $250,000 in the first year, and led to premium savings of $86,000. Additionally, the improved results allowed the company to bid on and win two large contracts worth more than $3 million.
2. Close your claims quickly
The best way to keep claims costs low is to get them closed quickly. To help accomplish this, companies should conduct a claim review in person with insurance carrier claim adjustors to determine whether:
Claim reserves are too high and need to be adjusted downward.
Open claims should be closed based on the claim’s circumstances.
This has proven to be particularly effective at reducing the outstanding open claim amounts which, in turn, improves premium pricing. Quarterly claim reviews, such as the one described, can result in an annualized reduction in claims of 20%.
3. Putting Workers’ Comp premiums in check
Workers’ Compensation experience modification ratings (EMR) are complex formulas but understanding the way they’re calculated can go a long way in helping to keep workers’ comp premiums in check.
To help manage Workers’ Compensation claims more efficiently, restoration contractors should routinely evaluate the experience modifier the same way that regulators do to determine its accuracy and to forecast its future financial impact on premium.
Inaccurate EMR calculations are typically the result of errors in payroll amounts, inaccurate job classifications, improper claim reserves and open claims that should be closed.
Case in point: A restoration contractor that performs work on both public and private projects was struggling to qualify for new contracts because of its high EMR of 1.16. A review of the company’s open claim reserves identified many excessive claims that needed to be negotiated down.
Following negotiations with the insurer, the company was able to lower its excessive claims, which accounted for nearly 20% of the experience modification calculation. The improved reserves were reported to the National Council on Compensation Insurance, resulting in a reduction in the company’s EMR from 1.16 to 0.94.
Subsequently, the company was able to bid on and win several new contracts worth more than $5 million, and also realized a premium savings of $64,000 over a three-year period.
4. Screening new hires
Preventing Workers’ Compensation claims from occurring is highly correlated to the quality and scope of a company’s hiring practices. Loss control representatives and claims advocates can provide the framework for a pre-employment screening procedure whereby medical providers evaluate candidates’ physical abilities based on detailed job descriptions. With pre-employment screening, employers are able to avoid candidates more likely to be injured on the job.
Case in point: A restoration contractor developed an extensive pre-employment screening process, reducing employee injuries by 25%. Prior to putting the screening procedure in place, the business incurred several employee injuries, thereby driving an increase in its workers’ compensation premium.
The solution included reviewing the company’s existing hiring practices and identifying several areas to improve the screening process and reduce post-hire claims. Eventually, enhanced screening led to a reduction in both the EMR and OSHA [Occupational Safety and Health Administration] Frequency and Severity Rates. The company achieved premium savings of $68,500 over the first two years.