Take the Sting Out of Workers` Comp Rates
Going to work isn’t nearly as dangerous today as it was in the days when young boys were forced to climb and clean chimneys, steel workers balanced untethered atop skyscrapers and women risked their limbs working in textile mills. Back then, every workday could be your last.
Today, modern comforts such as air conditioning and ergonomic desk chairs, and sophisticated tools such as bulldozers, cranes, chain saws and computers, along with strict government regulations, ensure that most Americans work in safe environments. But work hazards are still plentiful enough to require most businesses to carry workers’ compensation insurance to protect employees and their families in the event of an on-the-job injury or fatality.
With health care and insurance costs rising, savvy businesses are turning to technology and training to improve worker safety and lower expenses. Beyond the basic ergonomic desk, chair and curved keyboards, companies are adopting reasonably inexpensive solutions—such as using document scanning to reduce manual data input and wireless networks to expand work areas—to lessen the chance of injury and reduce insurance premiums.
“Preventing injury makes good business sense,” says Fred Blosser of the National Institute for Occupational Safety and Health (NIOSH) in Washington, D.C. “Aside from reducing human misery, by preventing injury, you—as a business—reduce your operating costs.”
While money pales in comparison to lives lost or shattered by injury, organizations that focus on ways to reduce their workers’ compensation insurance can create the best of both worlds: a workplace that protects employees while reducing insurance rates.
Some cost reductions have already come, courtesy of the government, the economy and Mother Nature. Florida, for example, has seen its workers’ compensation rates drop for the last two years, says Maria Suarez, workers’ compensation supervisor at First Commercial, a Miami-based underwriting firm. “Last year, rates went down a bit, and this year they went down a lot—about 20 percent,” she says.
The reasons: Two hurricane-free seasons and a weakened housing market resulted in less construction work and a reduced chance of on-the-job injuries, according to Doug Snider, president and CEO of thevalleongroup, a professional employer organization in Carrollton, Texas. “It’s getting easier and cheaper to buy workers’ compensation,” he says. “There are fewer people in business and less demand for workers’ comp.”
However, while rates may be declining, the cost of an individual worker’s compensation incident is increasing, says Mark Jablonowski, an analyst at Conning Research & Consulting, a Hartford, Conn., insurance industry analysis firm that published the 2007 study “Workers’ Compensation: Getting a Handle on Severity.” “The workers’ compensation line of insurance has seen a steady decrease in frequency over the past 10 years,” Jablonowski says, “but total incurred losses are climbing and continue to be driven by severity.”
He adds that cost-of-living increases, coupled with more expensive medical and legal fees, are causing workers’ compensation-related injuries and deaths to become more expensive. This further underscores the value that all organizations should place on increasing worker safety.
Despite the increased awareness of hazards and the number of tools available to safeguard workers, more must be done, say government officials. Last May, the Occupational Safety and Health Admin-istration (OSHA) sent letters to more than 14,000 workplaces with the highest occupational injury and illness rates.
These organizations included the U.S. Postal Service, along with some health care providers, nursing homes, retailers, manufacturers and airlines. OSHA officials urged these employers to mitigate the dangers that were causing the high rates.
The letter encouraged employers to hire outside safety and health consultants, talk with insurance carriers and contact state workers’ compensation agencies for advice. Smaller companies with fewer than 250 workers can tap OSHA’s on-site consultation program, which is administered by state agencies and operated separately from OSHA’s inspection program. The free service does not levy fines, even if OSHA consultants discover safety problems.
“A high injury and illness rate is costly to employees and employers in both personal and financial terms,” wrote Assistant Labor Secretary Edwin Foulke Jr. “Our goal is to make them aware of their high injury and illness rates and to get them to focus on eliminating hazards in their workplace. To help them, OSHA offers free assistance programs to help employers better protect the safety and health of their employees.”
Companies often enjoy a reduction in comp insurance rates as a side benefit to a technology implementation that was created to meet another business need, says Neal Fischer, principal at Hershey Technologies, a La Jolla, Calif.-based company that provides content capture, document management and business-process automation solutions.
“Frequently, companies and government agencies implement imaging systems in order to improve accuracy and productivity,” Fischer says, “but they find their workers’ comp rates go down dramatically—about 40 percent—because their typists and keyboardists are not inputting data all day.
“More government agencies are also using the Internet to allow residents to complete their own paperwork via an online form. This means more typing is done by individuals, rather than by a centralized typist or data-entry person.” That approach decreases the chance for error and lowers comp rates.
Imaging solutions—which typically involve a scanner, optical character recognition software and data storage—can be relatively inexpensive, especially since the cost can be amortized over multiple departments, such as human resources and comp insurance, clerical, accounting and customer service, Fischer says.
“Anybody doing a repetitive task with their hands or arms is prone [to injury],” says Snider of thevalleongroup.
“Repetitive motion is a real and costly claim for companies with extensive keyboard, data-entry and phone positions.”
Snider provides a likely scenario: A 100-employee firm where many of the workers do intensive data entry suffers 30 claims in a year, each costing about $30,000 for surgery, rehabilitation and lost wages. At that rate ($900,000), the company could have bought several imaging systems, kept its workers healthy, improved morale and saved money, he says.
Businesses also are tapping technology to keep comprehensive records of potential workers’ compensation claims. Most construction companies, which by their nature frequently find themselves in the middle of a workers’ comp case, have stringent safety measures and documentation policies that site supervisors must comply with, says Ahmed Chilmeran, a project manager at Parsons, an engineering and construction company in Pasadena, Calif.
“In construction, one of the ways to minimize workers’ comp costs is to document what happens,” he says. “It is hard to argue if somebody says, ‘I got hit by a backhoe.’ Documentation is a way of realistically minimizing the potential for fraudulent comp claims.”
Parsons, for example, features daily inspection reports that capture information on everything that occurred on the job site each day, Chilmeran says. “That would be valuable to insurance companies because they investigate each comp incident,” he adds.
Sorting It Out
Companies also can use search technology to make sure they are filed under the correct industry code, says Jim Moore, founder and president of J&L Insurance Consultants, which specializes in reducing businesses’ comp insurance rates. The Raleigh, N.C.-based firm claims to have saved its clients more than $3 million in premiums over four years.
One way it achieves those savings is by researching a company’s SIC code. Often, a number has been switched, meaning that a relatively safe industry is filed as a more dangerous business, which ups the comp rates, Moore explains.
The consultant also reviews companies’ experience modification factor (EMF), in which a review board considers all the steps a business has taken to enhance its safety, with the goal of reducing comp rates. One meat processing client cut its workers’ comp insurance in half over two years because of this review, says Moore.
By documenting their technological implementations, increased security awareness and other factors, businesses of all sizes can save dramatically on comp insurance costs. Larger enterprises frequently have departments—or an individual—responsible for overseeing safety, providing training and working with the IT department on technological solutions. Small and medium businesses typically don’t have these resources. But if an SMB provided training and got that process reviewed by an advisory council or rating bureau, it would see almost instant savings, Moore says.
In fact, educating employees about the correct ways to use equipment, pick up heavy items and prevent injury is a critical component of any safety initiative. A number of safety, insurance and government groups have provided grants to fund technologies used to create bilingual training materials.
In 2005, for example, a construction-industry advisory committee awarded $200,000 in Susan Harwood Training Grants to an organization of Hispanic contractors in Irving, Texas. The organization used the training grants to develop bilingual materials for the construction industry to address hazards and falls, electrocution caught-in hazards and struck-by hazards, says Jonathan Snare, assistant secretary of OSHA.
The federal agency has an array of grants, training materials and other resources available to encourage SMBs to reduce their risks, cut their workers’ compensation rates and improve the quality of their workers’ lives—while helping them become more profitable and efficient.
Corporate executives also can avail themselves of OSHA-generated case studies that detail various organizations’ successful implementations of training and technology to reduce workers’ compensation incident rates and costs. According to OSHA, such education efforts have led to a steady decline in the number of ergonomic-related injuries.
The best safety measures are simple and intuitive. Parsons’ Chilmeran, for example, relies on Microsoft Excel for much of his workers’ comp documentation. The spreadsheet features a field where he can enter data each day; this information is then moved to a back-office database that is searchable by field inspectors.
“One problem is that not everyone knows technology,” he says. “If you use state-of-the-art technology, you will scare people away. I take that into account.”
Chilmeran’s inexpensive setup consists of a spreadsheet, wireless connection and notebook. Some sites are too remote for wireless access and, in those cases, the information most likely would be sent via a messenger or shipping firm on a weekly instead of a daily basis.
“At Parsons, everyone’s required to complete training every year, even if they’re not in the field,” he says. “We have different types of safety training: Some programs are geared toward office people. The areas covered go from the ergonomics of your workstation to lifting a heavy weight to defensive driving. And we have even more comprehensive safety training for people working in the field.”
There will, of course, never be a world free of workplace injuries. But combining common sense with technologies that eliminate high-risk or repetitive tasks can improve an organization’s bottom line and, even more important, enhance the quality and length of an employee’s work life.