I never imagined I could actually feel sorry for any insurance company. By that I mean, feel sorry for its corporate balance sheet. I’ve got close friends working for behemoths in the industry and I could never feel ambivalent about their misfortune. But since learning about the underlying causes behind the trend in workers’ comp insurance rates, I’ve actually experienced a few moments of sympathy for these businesses.
Most Workers’ Comp carriers are faced with significantly declining profits related to escalating claims costs and operating expenses. Industry data shows the “combined ratio” for 2010 at 128%; meaning for every dollar a carrier takes in, they are spending $1.28 in claims and expenses. Ouch!
And since these guys’ investment portfolios aren’t doing any better than mine, it is not surprising to see rates on the rise. Many employers have already experienced increases in their workers’ compensation rates as high as 20% and in some instances, much higher. If your business happens to be located in California, you already know what I mean.
Actually, my heart stopped bleeding for our own carrier when I found out how much our Workers’ Comp premiums have increased in 2012. Let’s just say that managing this part of our business now has my full attention. So what strings can you pull to get your carrier’s size twelve back on the floor where it belongs?
- Safety … safety … safety. The best W/C claim is the one that never happens. And that means maintaining a work environment where doing jobs safely becomes second nature. Think regular safety meetings, on-going education, even performance metrics for managers.
- Tighten up your claims management process. Make sure that reserves are accurate and your adjuster knows you’re engaged and motivated to get a speedy resolution.
- Finally, implement a return to work program for injured workers who have been cleared for modified duty. I’ve seen how remarkably effective this tool can be.