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Understanding the total financial impact of on-the-job injuries requires employers to look beyond the initial cost of each claim. In the insurance industry, these hidden claims dollars are referred to as the “iceberg effect,” and a recent OSHA study has shown these costs can be very substantial. These indirect costs include everything from setting up a claim, doing associated paperwork, losing productivity, training temporary employees, and much more. In the case of smaller Workers’ Compensation claims, OSHA has determined that the indirect costs are, on average, more than four times greater than the direct costs associated with each claim.

Steps to Better Workers’ Compensation Program Management

Savvy business owners are beginning to understand that preventing and controlling on-the-job injuries not only reduces their Workers’ Compensation premiums—it reduces their total cost of risk far beyond insurance costs. With this in mind, here are five steps all employers should take to manage their Workers’ Compensation programs.

  1. Engage outside loss control and risk management services. The easiest way to handle on-the-job injuries is to prevent them from ever happening! Loss control and risk management professionals are trained to identify and understand risks associated with specific industries. Through a risk analysis, these experts can work with you and your team to understand the potential hazards facing your employees. Through plan implementation, they can help with training, education, and corrective action before a workplace injury occurs.
  2. Understand how individual claims impact your company’s Experience Modifier (e-mod). One of the things that makes Workers’ Compensation unique is that each policy holder receives their own individual e-mod that is used to determine the final Workers’ Compensation premium. In the insurance industry, we often refer to this as a Workers’ Compensation credit score—the better your past claims experience, the better your current pricing is, and vice versa. Part of managing your total cost of risk includes knowing what your potential minimum e-mod is, and understanding how each individual claim impacts your bottom line.
  3. Analyze and recognize trends in past claims history. They say the best indicator of future behavior is past behavior, and Workers’ Compensation claims are no exception. To recognize areas that need improvement, it is important to understand where claims activity is generated. To implement corrective or preventative measures, it is important to understand the types of injuries, locations of injuries, body parts involved, or even specific departments that are driving claims costs. Simply put, if you don’t know where you’ve been, it’s tough to determine where you’re headed.
  4. Develop procedures to control claims after they occur. In an ideal world, employers could prevent every single injury. In the real world, however, this simply is not possible. No matter how diligently a business works to avoid workplace injuries, accidents happen. After a claim occurs, interaction and communication with your insurance carrier and broker is paramount. Proactive claims management has been shown to get injured workers back to work more quickly and with improved health outcomes. The benefit for business owners is simple: claims costs are reduced, and employee morale is increased.
  5. Implement appropriate safety initiatives that promote and reward a strong safety culture. In personal relationships, communication is key. When it comes to encouraging a viable safety culture, we can say the same thing. Preventative safety measures are important, but they are meaningless if they are not clearly and consistently communicated to all levels of employees. The two biggest keys to success are the buy-in from all levels of management and the recognition of a job well done. Keeping this in mind, it is essential that management and supervisors take safety seriously and communicate that message regularly. It is also a great idea to implement safety incentive programs to reward workers who maintain a loss-free work environment. In many instances, we see employers do this by offering various incentives, such as a catered lunch for each loss-free quarter.

Improving Your Workplace Injury Risk Profile Takes Time

In the end, managing the total cost of risk associated with workplace injuries is not an overnight proposition. There is no “silver bullet” that will miraculously solve all safety related issues. However, with a multi-tiered approach, all business owners can improve their risk profiles and lower their costs associated with keeping their employees safe.

About the Author

Taylor Caraway
Taylor Caraway

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