Taking Control Of Your Workers Compensation Program: Hidden ...

While many of you have already probably heard, insurance rates for workers compensation are heading up again beginning January 2013. As many of you also know, I spend an inordinate amount of time teaching, speaking, and communicating about what elements of a workers compensation plan an employer can control, and which elements they cannot.

Late Friday evening California Insurance Commissioner Davey Jones released his decision on what direction workers compensation rates will head beginning January 1st, 2013. With this rate decision, Commissioner Jones agreed with the Workers Compensation Insurance Rating Bureau (WCIRB) that the insurance industry's balance sheets, and income statements are not as healthy as they should be. As you can surmise, the Commissioner has recommend a rate increase of approximately 15.6%!?http://www.wcexec.com/Pure-Premium-Rates-Go-Way-Up-for-Workers-Comp-Video.aspx

Since 2004, many purchasers of Workers Compensation Insurance have sought to solve their cash flow problems by placing insurance out to bid every few years in lieu of tackling the real culprits of excessive workers compensation costs. This strategy actually harms the employer while simultaneously lining the pockets of insurance company executives.. Many employers simply do not know what to do to significantly reduce their workers compensation costs and often rely on the bid process to help them reduce some of the increased expense.

What is the real trick to putting more money in your pocket, and less in the insurers? Controlling your own companies safety, culture, and leadership environment are just a few that come to mind. Have you ever stopped to think about the equivalent top line impact from reducing your Experience Mod by just 25%? What would a 50% reduction in your experience mod equate to in top land bottom line impact? How much would it cost you to capture the savings? The analysis can be quite compelling when you are searching out ways to find equivalent top line growth without adding an undue burden to your sales force.

If you have never asked your broker/consultant for what the impact would be on your current premiums, I would strongly recommend you either fire him for not bringing it to your attention sooner, or call your local rating bureau to get your lowest possible experience mod. Then do the math yourself.

Let's analyze the impact of the Commissioner's decision and it's impact on the experience rating of your business. While rate increases are never a good thing to employers who sign the front of the check, they do have some hidden benefits to the experience rating of small to mid sized employers who qualify for an experience modification.

Is there a silver lining on experience mods from the Insurance Commissioner's decision? First, it is important to understand some basics of experience mods. As new and future expected claim costs go up, so do workers compensation rates. As new and future expected claims costs go down, so do workers compensation rates. Experience mods are a function of actual claims of an employer divided by the expected claims of your industry (The formula is actual employer losses/expected industry losses). Therefore, as you increase the expected claims costs, you decrease the experience mod on a proportional level. All things being equal, this increase in basic expected future claims costs (agreed upon by Commissioner Jones), will drive average experience mods down as well.

While the decrease in average mods will be a good sign for some employers who are trending their actual losses downward, it still means thousands of employers who don't capitalize on reducing losses are leaving millions of dollars on the table. I encourage you to gain a better understanding of how this system really and how to capitalize on it by reducing your costs ?by calling me directly at 661-332-0382, or reaching out to me via email at riskmanager@vzw.blackberry.net.

Source: http://privateequityriskmanagers.blogspot.com/2012/12/hidden-benefits-of-recent-california.html

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