Each year Bill Dougherty teaches business owners how to Avoid the 10 Critical Business Insurance Mistakes. He motivates them to “take charge of their insurance program” to Reduce Costs and Maximize Value.
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Chapter 7: The Failure to Manage Your Workers Compensation Program
This is the 7th installment of “How to Avoid the 10 Critical Business Insurance Mistakes”
I hope by now you are on your way to improving the quality and cost of your insurance program by utilizing the first six steps of the system:
- Partnering with the “Right” agency
- Paying attention to the carrier’s financial performance
- Reviewing coverages with your agent
- Having a Claims Management Plan
- Working with only one agent
- Implementing a Risk Control/Loss Prevention Plan
This month we are going to explore one of the most “critical” mistakes of the “Critical 10” that I want you to avoid….
“The Failure to Manage Your Workers Compensation Program”
Since for most businesses Workers Compensation represents the largest portion of their insurance expense, proper focus will create significant savings and control future costs.
Also, due to the continuation of unprofitable results in this line of business, the insurance industry’s appetite for Workers Compensation is shrinking so you need to be on top of this issue.
What can you do?
Conduct a complete review of your classifications. Are your employees properly classified at the lowest rated class?
Audit your Experience Modification calculation to be sure it is correct. It’s not unusual for the Bureau to make mistakes in this complex calculation.
Be sure you apply for Construction Class Credits if you are eligible. Credits up to 25% can be earned and applied to your premium.
One other major “TO DO” for your agent. Remember Mistake #4 – Not having a Claims Management Plan”?
Your claims reviews with your agent must focus on the status of all Workers Compensation reserves. Insurance carriers have no motivation to set up low reserves or to remove reserves quickly once a settlement is achieved or the employee returns to work. Why? Because, the insurance industry receives favorable tax treatment on their reserves.
Excessive and/or aged reserves have a direct impact on your experience modification and ultimately your costs. The “right” agent should function as an intermediary between you and the carrier’s claim department to manage all reserve activity and to ensure that your insurance costs are not being impacted by “aged reserves”.
This is only an “Executive Summary” of a two hour seminar on this subject.
If you have any questions or need additional information just give me a call.
Just Do It,
Bill Dougherty, EVP
True & Associates