Some businesses are experiencing an unpleasant shock when renewing their commercial insurance. Market conditions for many commercial lines are changing from a “soft” to a “hard” market, where premiums increase and underwriting requirements tighten. Fortunately, workers’ compensation is a notable exception.
A “soft” insurance market can give a false sense of reality and some companies relax their focus on managing risk and losses. Yet, maintaining an accurate accounting of your performance is critical in both a soft and hard market. This ensures your company is less vulnerable to the inevitable cycles that occur in all lines of insurance.
Here are seven reasons to keep your eye on strategy:
- The company’s risk profile is key regardless of market conditions and has implications across all business categories. Given the availability of big data today, the workers’ compensation premium is based on more than payroll and the Experience Mod. What’s critical is the insurance’s company perception of your risk. Importantly, the totality of your risk is relevant. For example, how you select drivers and conduct fleet safety affects both auto insurance and workers’ comp.
Many factors go into the assessment of risk. The insurance company expects your risk management to be an ongoing process. It’s important to know the granular details of claims and what was done post-incident, so an informed conversation can take place when questions arise. A strong partnership with a broker who understands your business is essential to long-term cost control.
Your safety strategy should be an integral part of your business strategy, not a standalone that can be put on the back burner when working well. It’s not a set of tactics, it’s what the company does, a shared vision and the plan to achieve safety excellence. When leadership loses its focus, the Workers’ Compensation program is without a compass and ultimately will flounder.
- Insurance rates are cyclical. While there are many positive trends impacting workers’ comp, including controlling opioids prescriptions, safer workplaces, and benign medical inflation that may keep rates low, there are some hovering clouds. For only the second time since 2003, the rate of nonfatal workplace injuries did not decrease, but held steady in 2018 according to the BLS. With relaxing ACA participation requirements, the rate of medically uninsured ticked higher in 2018, which could impact workers’ comp. The implications of medical marijuana and recreational marijuana on incident rates are troubling, Medicare Set-Asides can be complicated and unpredictable, and medical advances and longer lives have dramatically driven up the costs of catastrophic claims.
Further, if insurers need to make up for losses in other commercial lines, they can look to Workers’ Compensation.
- Some industries are more vulnerable than others, including temporary staffing organizations, transportation, and retail. The BLS report spotlighted injury trends for the retail industry, where the rate of nonfatal workplace injuries increased from 3.3 per 100 workers in 2017 to 3.5 per 100 last year. Cases with days away from work also increased in retail, from 1 to 1.1 per 100 workers from 2017 to 2018.
- Seemingly minor missteps, such as delays in reporting or treatment, can escalate costs or lead to litigation. According to a study by the Hartford Financial Service Group, claims reported 7-14 days after the injury cost 18 percent more than those filed within a week of the injury. Wait 15-28 days and the costs jump 30 percent. Delaying medical treatment by even one day increases OSHA recordability by 60 percent.
- A lack of vigilance leads to a failure to identify potential high-cost claims early. The more information an adjuster has, the more efficiently a claim can be managed. Information on job description, co-morbidities, recovery at work options, prior workers’ comp claims, workplace disputes, and so on, are critical for expediting the process. Ignoring an employee who has multiple small injuries is a lost time injury waiting to happen. And failure to settle legacy claims means less scrutiny of the costs that are driving the claim. All are red flags to insurance companies about risk exposure.
- Insurance companies make mistakes. Payroll errors, incorrect Experience Modifiers, classification errors, over or under reserving claims, and failure to report subrogation recovery are just some of the common mistakes that lead to overcharging.
- The gig economy and classification of independent contractors is a hot legislative issue. California’s AB5, which goes into effect Jan. 1, 2020, changes the criteria used to classify employees and independent contractors, making it more difficult to classify an employee as an independent contractor. While this is a state law, California is often considered the bellwether for workplace protection laws. Labor groups and lawmakers will be watching closely to see how this evolves. In fact, in New York, a similar bill was introduced in the Senate in November.
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