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7 WAYS BROKERS CAN HELP EMPLOYERS CONTROL WORKERS’ COMP COSTS range from price increases to the possibility that insurers will not renew coverage. Some insurers have already limited their underwriting of workers’ compensation for these types of companies, according to the Marsh report. Because insurers cannot exclude terrorismrelated losses and employers are required to buy it, the options available to buyers have been reduced and rate increases have accelerated. How can agents help? By starting the renewal process early and providing insurers with a differentiated view of the insured’s terrorism risk profile. The Marsh report says providing underwriters with the highest quality of employeeaccumulation data to run in their catastrophe models can ensure carriers have an accurate view of the risk. To date, there has been little legislative action regarding TRIPRA, leaving its extension in limbo.
RATES ON THE RISE As the US unemployment rate shows modest declines and wages are slowly increasing, it’s no surprise that workers’ compensation premiums are continuing to show growth. A quick look back at the past eight years tells us that the workers’ comp market suffered through a 27% decline in premium from 2006 to 2010 before rebounding with growth in the past three years, including a 10% increase in 2012 to more than $39bn, according to an annual study by the National Council on Compensation Insurance (NCCI). As of February, figures for 2013 have not yet been released. Wells Fargo took a look at what to expect through 2014 in the workers’ comp market in its 2014 Insurance Market Outlook, released January 30. In addition to concurring with the Marsh report regarding TRIPRA, the report forecasts continued rate increases for the first three quarters of this year, along with continued reduction in the combined loss ratio, resulting from higher prices seen over the past three years. The report includes several other predictions, such as continued movement away from guaranteed cost program structures into higher deductible program structures, either because they are a more appealing alternative or a necessity. One final prediction in the report says the continued use of predictive modeling analysis to improve risk selection, proper retention levels and
Business owners are finding themselves paying more for workers’ compensation in 2014 as insurers are increasing rates in most states. While businesses in a few states might see some slight decreases, most business owners will be writing bigger checks for workers’ comp this year, even if their business hasn’t grown substantially. Part of the issue is that experience modifiers, the adjustment of annual workers’ comp premium based on previous loss experience, has changed in most states. In the 36 states where the National Council on Compensation Insurance (NCCI) is the rating bureau that determines the rules for workers’ comp and calculates the experience mods, a substantial change to the experience mod calculation occurred in 2013. The split point between primary and excess losses was increased from $5,000 to $10,000, and went up to $13,500 in 2014. It could top $15,000 in 2015. The split point is increasing simply because the cost of employee injuries has risen dramatically. While the average employee injury cost an insurance company around $3,000 in 1991, it rose to nearly $9,000 by 2011. Basically, employers need to know this change will reduce their minimum experience mod to as low as it can be, but businesses also now have more control and ability to reduce their experience mod and control what they pay for workers’ comp. Brokers can be of great assistance in this area. By helping employers understand how it works and how they can manage it, you are offering real value that will help their bottom line. Every dollar an insurance company pays on a workers’ comp claim impacts the amount they will pay in premium. Here are seven ways to help employers manage their experience mod:
1
Help them make sure their employees are classified accurately. A substantial part of the experience mod calculation is based on the nearly 700 employee classifications used by NCCI. Having employees classified correctly can prevent employers from paying more than they should.
2
Advise them of how important it is to hire only employees who they are certain are fit to do the job they are being hired to do. This can be done by using a conditional offer of employment form, which states the employer is offering the job contingent upon receiving a medical opinion that the applicant is mentally and physically able to perform all the duties the position requires. This prevents hiring employees who are unable to safely do the job.
3
Make sure employers provide thorough and proper training for all equipment used on the job.
4
Stress the importance of creating and maintaining a culture of workplace safety, in which employees know they must adhere to strict safety protocols. Maintaining a safety-conscious workplace will prevent the vast majority of injuries.
5
When an injury does occur, make sure the company knows it is important to have it reported and treated immediately.
6
A clearly defined ‘return to work’ program is also important to get injured employees back on the job as quickly as possible, even in a transitional capacity. A RAND Corporation study found that employers with a written ‘return to work’ program returned injured employees to full duty 46% faster than companies without a written program.
7
Make sure the employer has relationships with doctors who understand their business and specialize in the workers’ comp arena. They have facilities to treat injured employees and promote appropriate physical therapy to help employees recuperate and return to work faster.
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