Insurance companies do not pay for employee injuries—they just finance them.
You pay $2 to $3 for every dollar the insurance company pays out for injuries.
First, you pay outrageous premiums, then pay again for claims:
- You pay more because your experience mod skyrockets.
- You pay for lost proactivity.
- You pay for lost morale.
- You pay for financial management and staff stress.
Workers compensation does not pay for injuries—you do.
You must take an active part in claims management and determine:
- Which medical providers to visit.
- What happens immediately after the medical provider visit.
- The plan for the injured employee to recover at work.
You must report the injury the day of the injury. However, it is your company’s process that will keep costs down. A process that protects against an experience mod that jumps higher and costs you gobs of additional premium
You control if your audit is error free, overcharge free and 100 percent correct. The audit is determined after the policy expires—it is essential it is correct. You are at a disadvantage because the auditor knows the rules, sometimes they don’t.
Here is how the auditor works against you:
- Your entire payroll is put in the highest classification.
- The “standard class exceptions” are put into the correct cost classification; you hope. If not properly moved to the lower class, you pay the highest rate.
Misclassifications are common and the system is designed for you to pay for the mistakes.
The audit should only be conducted with an expert by their side. You should always ask for a copy of the auditor’s worksheet and have your agent review it.
Experience modification factors are often wrong or mismanaged. Most buyers assume the mod is correct, but most of the time it could be wrong. When this happens, the insurance company benefits. A qualified agent knows how to control your costs.
Claim problems begin at “date of hire” and not at time of injury. Are you hiring “claims.” Exaggerated claims are primarily the result of hiring or keeping the wrong person instead of an unsafe workplace. Use a specific hiring form.
Your workers compensation is the only insurance you and your agent can control.
If you do not pay attention, you will suffer unnecessary and controllable errors and overcharges.
If your agent is an expert in workers compensation, here is what he should do to insure that you are not being overcharged:
- Establish a process that jumps into action when an employee has an injury.
- Build a process to manage claims internally.
- Manage and verify premium audits.
- Validate your experience mod for accuracy.
- Review your insurance plan to see if it is right for you. Are you in the Assigned Risk? Did your agent try to get you out?
- Control subcontractors’ insurance.
- If you are a subcontractor, work diligently to keep your mod below 1.00.
- Confirm each employee is classified correctly.
You can slash your costs if you install the right system:
- Find and fix mistakes in your system.
- Confirm you have an ongoing error and overcharge free program.
- Create processes to control employee costs.
- Build a plan to take your experience mod to its minimum. We have four Foodtowns with a manual premium of $180,000 and a minimum mod of .67. Think how much that saves them.
Through implementation of our system, you can drive your costs down to its legal minimum. The minimum mod. is the lowest you can achieve with no losses. The difference between your present mod. and the minimum mod. is what you can save with no losses. The savings can be significant. Has your agent calculated your minimum mod?
Bruce C. Dolin has over 40 years experience in insurance and was past president of the Professional Insurance Agents Association and New Jersey Agent of the Year. He is managing partner of Professional Insurance Associates, Inc. in Carlstadt, NJ. He holds the following designations: MLIS, ARM, PWCA, CIC, CPIA, AAI, AIS, CWCA, CRIS. He is a member of the Institute of W.C. Advisors, Institute of W.C. Professionals and American Society of W.C. Professionals.