Sofety qnd Workmen's Compensqtion lnsurctnce Rcltes

By M. M. Eisenbrey, Sofety Service Deporlment Stote Compensotion lnsuronce Fund, Son Froncisco

For the Colifornio

Compensatioti insurance costs can be reduced. Most experts on accident prevention agree that inclustrial accidents are the result of unsafe conditions and/or unsafe acts' By rvorking tou'ards the elimination of these two factors, an employer is adopting the only sure course towards reclucing his net cost of u'orkmen's compensation insurance'

The California Lttmllernten's Accident Prevention Association, con.tposed of lumber operators actively engaged in promoting accident prevention in their industry, in conjunction rvith the Forest Products Section of the California Inclustrial Safety Conference, is doing much to give real, practical meaning to this basic and fundamental concel>t of accident prevention. It is the opinion of this association that if more operators realized holt the cost of accidents directlv affected the p:ice they must pay for insurance, that awareness of this fact in itself 'rvould act as a further incentive to promote effective accident prevention in the industry.

The follou'ing is a brief outline of the mechanics of compensation insttrance rate making and several ways b1' u,hich the individual employer can reduce the cost of his insurance by applying effective and proven accident prevention techniques.

When the compulsory Workmen's Compensation Lau' rvas enacted in California in 1913, and continuing down to this day, it u'as the legislative intent that the cost of industrial injuries be considered part of tl-re cost o{ production. and that each industry pay the bill for its or'vn industrial deaths and injuries. In order to accomplish this the employers of Cali{ornia in all fields of endeavor have been divided into approximately 400 industry groups or "classifications." Once a year the State Insurance Commissioner

Lumbermen's

Accident Prevention Associotion issues a set of rates applying to each of these classifications' This rate is known as the n.ranual or basic minimum rate and is based upon the actual accident cost of each industry reported durins the preceeding two-year period. It can be quickly seen. then, that as an industry as a u'hole reduces the cost of industrial accidents this has the effect of reducing the basic or manual rates for that industry.

The tabulation belo'iv indicates the trend in basic rates for the six major lumber classifications:

At this juncture an operator might rvell raise this cluestion, "These basic rates represent an average of all the members of our industry, good and bad alike; isn't there some way for me to get credit for my own accident Preventiorl u'orks ? The ans\\'er is "Yes," there are two very tangible r.vays that this may be done.

N'Ierit Rating Plans. Almost from the very beginning of rate making in California it rvas acknorvledged that the attitude tou'arcl safety and the cluality of supervision among ettrplol'ers rvould vary considerably. To provicle an incentive tolvards accident prevention and to prevent undue penalty being assessed against the careful employer because of the neglience of others, a rating plan rvas devised rvhich had the effect of varying the rates upr,r'ard or do'lvnrvard depending upon holv successful the individual employer had been in controlling' his accident costs. This plan is knolvn as the Experience Rating Plan.

Experience rating takes into consideration both the frequency and the severity of injury and compares the individual employer's accident costs over the past three-year period with the average for l-ris industry. The employer's rate is then modified by his ability and willingness to prevent accidents and is either rewarded or penalized depending upon the success of his efforts.

The second form of merit rating under which a California employer can to a degree control his own insurance cost is designed to measure the physical characteristics of manufacturing plants against established standards. This rating plan is the Industrial Compensation Rating Schedule or as it is commonly known, "Schedule Rating."

Schedule Rating consists of two basic parts:

(1) The degree to which accident hazards are removed or minimized through the installation of mechanical safeguards in accordance with the established standards.

(2) The extent to which safety education, plant inspection, and organized accident prevention programs are carried out with the aim of detecting and correcting unsafe acts and unsafe conditions before tl-re accident occurs.

Schedule Rating is concerned with minimizing "machine" hazards most prevalent in manufacturing operations in fixed locations, and credit and debit charges provided for by the plan apply only to certain designated classifications in the manual. For the six classes listed as common to the logging and lumbering industry, only Classifications 2883 (Box, Box Shook Lumber Manufacturing), 2731 (Planing Mill), and 27lO (Sawmills) are eligible for Schedule Rating. The Classifi'cations 8?32 (Lumber Yards-Commercial) and 8207 (Sawmills, Lumber Handling) can be brought under the plan for that portion of the credit obtained from conducting a safety organization after the operation has qualified for Schedule Rating under the other requirements of the plan.

Eligibility for the safety organization portion of the Schedule Rating Plan is based upon the number of employees (15 minimum) working under one or a combination of schedule ratable classifications at the same location. This portion of the Schedule Rating Plan is a very valuable tool in accident prevention. Certain minimum requirements include regular monthly meetings of established safety com- mittees, regular periodic safety inspections of the entire operation and certain specified safety activities including safety bulletin boards and safety instructions to new employees. Regular written reports of the activity also are required.

{Jnder the l\{echanical Guarding Section of the Schedule Rating Plan, it is possible to receive a substantial rate reduction by providing required standard safeguards on the machines used in the plant to control the machine hazards of moving parts, drive mechanisms, and points of operations. It is difficult to state an average credit which may be earned under this section of the plan; but, if full advantage is taken of all possible safeguarding opportunities and an effective safety program is maintained, an employer can earn rate credits of l5/o to 3O/o.

In general, the Schedule Rating Plan encourages the operator to correct unsafe conditions by giving him immediate rate credit for the accident prevention work accomplished. A regular safety organization prog.ram encourages both the correction of unsafe conditions by its inspection service to find and correct hazards and the education of all employees to think and work safely.

Both schedule and experience rates are calculated from the data submitted by the insurance carriers to the California Inspection Rating Bureau, the official rate making agency for the Insurance Commissioner.

The misconception that the insurance company "pays the bill" for industrial accidents is one that lulls many operators into a haphazard attitude towards accident prevention. First of all as rve have pointed out here, it is the cost of these accidents which determines the rates for your insurance. Secondly, it is a well established fact that the direct insurance cost resulting from industrial accidents is only a very small part of the total loss when measured in terms of production loss, replacement and training of new personnel, and human misery.

Some operators realize all too late that it is they rvho pick up the tab for the cost of an accident that could have been prevented. Safety pays always in all ways. It is possible to obtain a two-way rate reduction on your compensation insurance by taking advantage of the provisions of these two merit rating plans by effective accident prevention work-Remove Unsafe Conditions-Control and Prevent the Unsafe Acts of Your Employees.

Flanford

Fluntingtorr Ileach

Huntington 1'ark

Inglewood

Kern County

Laguna Beach

La Mesa

La Verne

Lindsay

Lodi

Lompoc

Long Beach

Los Angeles

Los Angeles County

Los Gatos

Lynwood

Madera

Manhattan Beach

Marin County '

Martinez

Marysville

Maywood

Menlo Park

Merced

Mill Valley

Modesto

I\,I onrovia

IVlontebello

Iv{onterey

BUILDING PER,ffIITS FOR NOVEffIBER

San Mateo San Mateo San Rafael

Santa Ana

Santa llarbara

Santa Clara

Sauta Clara Count,v

Santa Cruz

Santa Maria

Santa I\,fonica

Santa Paula

Santa Rosa

Seal Beach

Selma

Shasta County

Sierra Madre

Solano County

South Gate

South Pasarlena .......:...... :..:

South San Francisco

Stanislaus County

Stock ton

Sunnyvale

Torrance 'f racy

County

Vernon Visatia

County

Watsonville

West Covina

Monterey

Mountain Par Vie l-

Napa

Naiional City

Whittier

Woodland

Yreka

Newport Beach City

Yuba