SilverLink - Winter 2008 - (Page 5)

risk ManageMent Property & Casualty Workers’ Compensation Rate Declines The Calm Before the Storm? by Eivind Oland, AAI, CIC, CWCA In recent months, many employers have been pleasantly surprised to see workers’ compensation (work comp) rates declining. While this rate decline is a positive and welcome trend, it’s probably unwise to become too complacent; history shows that most declines are merely the “calm before the storm,” with rising rates to follow. In fact, many employers may find themselves paying back some—or even all—of their premium savings as the next wave of price increases hits. “Relying on reforms and the insurance marketplace cycles for long-term and stable cost reduction is a fool’s errand,” says Frank Pennachio of the Institute of WorkComp Professionals. He adds, ”…while these attempts might help in the short term, a positive long-term outcome requires a proactive approach.”1 It Feels Like Something’s Wrong Employers may attempt to reduce claims costs by “beefing up” injury prevention efforts. No matter how carefully you hire, how thoroughly you train and how diligently you attempt to prevent injuries, claims may still occur. Additionally, some employers may not have a good understanding of how the experience mod rating system works. They may also be unaware that processes and procedures are available to help improve outcomes. At times, an employer may feel like a “victim of the system”—helpless to manage injury costs—and at the mercy of a work comp program that just doesn’t seem to be working. At this point, it may be helpful for an employer to seek outside expertise. Most employers don’t hesitate to ask for help with other business issues. Workers’ compensation is just one part of doing business, and consultants who specialize in work comp issues can help an organization deal with work comp initiatives and set up programs that are custom-designed to meet the individual needs of the business. It’s a matter of analyzing the problem and creating both short- and long-term solutions, with well-defined and attainable goals. How it Works When seeking to improve outcomes, it’s vital that employers understand how work comp insurance works. This type of insurance functions more like a credit line than insurance; in effect, a work comp policy is used to finance injury costs. The experience plan administered by the National Council on Compensation Insurance (NCCI) is a complicated program intended to assist insurance carriers in tailoring the pricing of insurance to the individual characteristics and historic experience of an employer. If an employer’s claims history has been higher than expected, this translates into a “tax,” or debit, that may affect the employer’s future premiums for three or more years. The same rating system is intended to benefit employers who suffer catastrophic but infrequent injuries and to protect carriers from insolvency over the long term. As determined by the NCCI and other state rating bureaus, experience mod factors work on the premise that if rates go down, so should expected injury costs. If actual injury costs fail to decline in proportion to rates, experience mod factors increase. As a result, any hoped-for savings is reduced (or eliminated) and additional costs may be added over the next three to five years. In order to avoid this effect, employers must be vigilant and proactive to reduce injury expenses! 5 silverlink — Winter 2008 Getting Back on Track As part of that process, it’s critical to address the issue of reducing or mitigating injury costs. Quite simply, there are two primary considerations: what to do before a workplace injury occurs and what to do after such an injury occurs. Employers should take the following steps before an injury occurs: • Select and train an Injury and Disability Coordinator to manage information from the parties involved.

Table of Contents Feed for the Digital Edition of SilverLink - Winter 2008

SilverLink - Winter 2008 Contents Risk Management: Where in the World is Human Resource Consulting? Workers’ Compensation Rate Declines Insurance Certificates Haute Retirement It All Began with a Cup of Coffee Playing Fair in the Housing Market Captives 101 Proceed with Caution Fore! (Or is it Pull? or Giddyup?) Don’t Be Fuelish Employee Benefits: Medical Trend Countdown to Compliance Private Client Services: Buy & Sell Agreements Flood Insurance Pushing Wealth to the Next Generation Client Spotlight: Travel and Transport Internal Happenings: SilverStone Group Giving Back Since 1945

SilverLink - Winter 2008

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