There is an old adage in life – KISS – simply translated into Keep It Simple Stupid. When it comes to workers compensation, most folks know that things are not oftentimes simple.
Here is just one example of a number of challenges in the workers comp industry as 2014 continues to unfold:
California Claim Costs Average 40% Higher than NCCI States
According to a 2013 Workers Compensation Insurance Rating Bureau (WCIRB) report on insurer experience as of the end of September of last year, costs in the California marketplace definitely raised some eyebrows when compared with other parts of the country.
Among the challenges in the Golden State are increasing claim frequency and pure premium loss rates, along with an influx of litigation.
As a result, when putting in play National Council on Compensation Insurance (NCCI) data, the typical expense of a claim in California is nearly 40 higher than that of the NCCI tracked states (CA $69,536 vs. NCCI $50,300, without Allocated Loss Adjustment Expense (ALAE) and medical-only claims).
While many California businesses figure workers comp costs into their yearly budgets, not having a game plan for how to deal with such accidents, not to mention practicing prevention in the first place, can lead to sizable financial issues.
Introduce Cost-Control Calculators to Create Understanding
So, why go through the hassle of trying to control your workers compensation costs?
Though some matters can be difficult to control in the business world, there are methods available to business owners to help decrease workers comp costs.
One area of focus is a Sales To Pay for Accidents work comp calculator which allow you to provide a picture of the amount of sales necessary to replace the expense of workers comp insurance losses for your company’s bottom line.
You can use comparable metrics such as:
- If you run a restaurant, do a comparison of the workers comp losses to the number of diners needed to pay for such losses;
- When running a travel business, compare to number of trips to be sold to cover such losses.
When workers compensation is put into these terms, it becomes less of a “cost of doing business”, and more into an area that can become a profit center for your business.
Team Effort Necessary to Reduce Losses
One critical facet to reducing your losses is making sure EVERY employee is in step with what you’re trying to accomplish.
While many business owners like to keep their book’s numbers to themselves or just a select few in the office, let your employees know how important it is to practice safety on the job. One way to do this is to show them (by the numbers) just how expensive an injury here and an injury there on the job can financially impact everyone on the team.
Whether a claim is small, medium range, or large; it has an effect on your company’s bottom line. The more senior management to the everyday worker understands this fact, the more success the company will see with controlling workers compensation expenses.
Author Michael B. Stack, CPA, Principal, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.
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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.
