Workers' Compensation Insurance: Who's Really Paying for Injuries?

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Like it or not, you pay for injuries. The insurance companies just finances them.

In fact, on a less severe claim, you will pay them back through an increase in premium 100% up to over 250%! They simply cover the initial costs of the claim so it’s impact on your company is not all at once. The total incurred cost of the claim, total paid & total reserves, are then included in the calculation of your experience mod, which will increase or decrease based up on the costs & type of the claims.

Let’s take a look at an actual example. A manufacturing company’s based in MN, has a anual premium of $215,000 a year. And for simplicity reasons, they have three recordable claims in a policy year. 

Everyone of these claims are “lost time” claims and the employee’s were provided with indemnity payments. The impact these specific claims are listed below:

Total Incurred Cost        Impact on EMR        Impact on Premium over 3 yrs

         $288                            +.0007                          $453(+157%)

         $3,642                         +.0113                        $7,290(+200%)

         $25,232                       +.0316                         $20,382(-20%)

The point of me highlighting the fact that claims are “refinanced” through an increase of premium, is to increase your antenna so you realize even the smallest of claims need your immediate attention. So what can you do about it?

  • If your company is based in an ERA approved state, get your employees on transitional duty before the state specific time period expires
  • Increase employee awareness the implications of injuries have on them, and the ability of the company continuing to function
  • Understand the driving factors of your EMR
  • Conduct a root cause analysis on all injuries, not just certain ones
  • Meet with your agent and adjuster prior to your policy valuation date to evaluate & minimize reserves on open claims

Of course there is much more that you can do, but by simply understanding the fact that you ultimately pay for your claims, will increase your awareness and hopefully lead to implementing workers’ compensation and safety strategies to decrease the number of injuries, as well as the overall “hit” your bottom line takes.

Jeff is the CEO and founder of  www.jarsity.com, and is a leading expert in training small and mid size businesses in how to reduce their cost of commercial insurance, with ground breaking on-demand video training, podcasts, virtual classroom training, and on site consulting. For more information please visit www.jarsity.com

 

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