.jpg "Corin Cook")
Here’s something I think we can all agree on: nobody wants their employees to get injured on the job.
For one, you care about your employees (at least we really hope you do). But on top of that, employee injuries also create a lot of hassle for your business. You could have to go through the trouble of filing a workers’ compensation claim, have to pay for the injured’s medical bills, and miss out on their contributions to the team all while still paying their salary.
And just to kick you while you’re down, you can then expect your workers’ compensation premium to skyrocket for the next few years.
It’s one of the last things you want to deal with as a business.
We’re right there with you. As a business ourselves, we don’t want our employees to ever be injured on the job – we also don’t want any accidents to increase our insurance premiums down the road. Through managing hundreds of other businesses workers’ comp policies, we’ve learned these fears tend to be universal.
So in this article, we’ll tell you how to prevent and manage workplace injuries, and in turn, reduce the cost of your workers’ compensation.
Why employee injuries increase your workers’ compensation costs
We know you’re here to learn how to keep your workers’ comp costs down. But before we get to the “how,” let’s address the “why.” Why do injuries affect workers’ comp premium in the first place?
Insurance is there to deal with any claims your business may have. But just like you as a company try to avoid having claims, insurance companies don’t want you to have any claims either.
Why? Because it costs them extra time, effort, and money. Makes sense.
So here’s the thing: because insurance companies don’t want you to have claims, they kind of penalize you for having claims by charging you extra for your insurance.
If you’ve had prior claims, insurance companies see you as a risk to have additional claims in the future, so they want to reduce their risk of losing money from you by charging you more.
And workers’ compensation is no different.
In fact, employee injuries are one of the most influential factors in driving up workers’ compensation costs.
To determine how much they charge you for prior injuries, insurance companies use something called an experience modification rating or experience modification factor (EMR).
What is an experience modification rating?
An experience modification rating is a metric used to calculate a company’s workers’ compensation premium, based on their number of claims and the claim costs.
It’s kind of like a credit score for workers’ comp!
The number represents a ratio of a company’s cost of workers’ compensation claims compared to companies of similar size and industry.
Essentially, it portrays the risk of insuring or working with your company, compared to your competitors.
The purpose of the EMR is not only to determine risk, but also to provide an incentive to companies to provide safe workplaces. If a safer workplace yields a lower insurance premium, companies may be more motivated to implement certain safety procedures.
The rate is calculated using three years of claims data (the last four years, excluding the most recent year) as well as the size of your payroll.
Typically, the EMR benchmark is 1.0. If your number is lower than 1.0, you have less workers’ comp losses than comparable businesses and your premium will be lower. If your number is higher than 1.0, you have more workers’ comp losses than comparable businesses, and your premium will be higher.
For example, if your EMR is 1.3 and your competitor’s is 1.0, your premium could be $13,000 while your competitor’s could only be $10,000.
Knowing this, it’s clear that reducing employee injuries should be a priority – not only to keep your employees safe, healthy, and working; but also to save your company money.
Want to know another way to save money on workers' compensation insurance? Managing your audit correctly. That's right -- businesses lose money every year from incorrect audits. Download this workbook to organize all the information you need for your audit.
How to prevent injuries
Like we mentioned, your EMR is one of the greatest factors influencing workers’ comp costs. That’s why the most effective way to reduce workers’ compensation costs is to prevent injuries in the first place.
And the easiest way to reduce claims is through a thorough safety plan. Basically, you should have a formal plan in place to make sure your company is a safe work environment. But it can’t stop there. You should make sure your entire team is informed of the plan, and you should regularly revisit and revise it.
Here is what we recommend go into an effective safety plan:
Risk identification: Before you can reduce risks you must identify them. Consider the risks of your office or any out-of-office locations your employees may work at. Evaluate all of your employees’ daily operations. Inspect the equipment your employees use. Where may accidents or injuries occur?
Risk management: Once you’ve identified potential risks, you should get to work on fixing them. Of course, these fixes will vary depending on your office and industry, but may include keeping the office clean and free of obstacles, labeling dangerous equipment or areas, regularly inspecting and servicing equipment, or providing employees with safety equipment.
Safety training: It’s important all your employees be trained on safety practices associated with their jobs. For example, if employees use equipment or lift heavy objects, you will want to train them on equipment safety and proper lifting techniques.
Review/revision: When it comes to a safety plan, you cannot have a set it and forget it mentality. Your plan should be reviewed regularly, and taken into consideration whenever you get new equipment, hire a new employee, or make any other changes to your office. You may also want to consider establishing a safety committee to keep up to date on training and revisions.
How to manage injuries after they happen
You can’t prevent all injuries, so it is also important that you know how to properly manage injuries when they do happen.
This is because in addition to claim frequency, claim length can also increase your workers’ compensation cost. Insurance companies want as few open claims as possible, so lengthy claims will negatively impact your EMR, therefore your workers’ comp cost.
That’s why you should have a plan in place to help return injured employees to work as soon as possible.
Check in on your injured employees regularly to see if there is anything you can do and to make them realize they are important. Letting them know they are a valued part of the team can go a long way in boosting their morale and motivating them to return to work sooner.
You can also establish a light duty policy, which will allow employees to return to work without having to do any duties that will aggravate their injury.
If you work with Berry Insurance, we can provide sample safety plans, return to work plans, and other safety tools to help employers manage claims before they ever become a problem.
To learn more about what we can offer to business insurance clients, read this article.
Let an experienced agent help you save money on workers’ compensation
Preventing and managing injuries is an important part of your job as a business owner.
But on top of all your other responsibilities, it can be a lot to manage. So you shouldn’t have to do it all on your own.
But did you know that if you work with a reputable business insurance agent, they can help you manage injuries as well as several other aspects of your insurance policies?
An independent insurance agency is a free resource that can really save you a lot of time, energy, and money.
To learn more about what your insurance agency can and should be doing for you, check out this article: 7 Things your Workers’ Compensation Insurance Agent Should be Doing for You.
