New Workers Compensation Experience Modification Formula Increases Incentives For Getting Injured Employees Back To Work.

Starting with policy year 2013, the work comp experience modification formula will change.  The old formula has gotten long in the tooth and these changes are designed to give more weight to any given employer’s actual workers compensation experience than the old formula is able to better reflect any given company’s actual loss experience.  But for most people, the mod formula is confusing and complicated and grasping this change will be best understood once they receive their new, recalculated mod.  So while we won’t get into a lot of details about the math in this article, we will talk about the impact of getting your people back to work more quickly and how this one act can affect the final experience mod factors across different industries. 

Here is a simplistic answer to what is changing in the experience modification formula.  Your mod formula is the tool that the insurance industry uses  which attempts to compare your actual loss results with those that would be expected based on your payrolls for each class code on your workers compensation insurance policy.  Primary losses, one side of this formula, are currently capped at $5000, regardless of how much more than that is actually paid out.  This is called the split point and this is what is changing.  Beginning next year this cap will increase and by 2015 will be more than $15,000.  After that it will change to reflect the inflation rate.   For many employers with claims over $5,000, the primary impact of this change will be to push bigger numbers to this side of the formula.  While the mod changes should be nearly neutral over the entire universe of workers compensation policies, some companies will see big increases while others may see decreases.  So how vulnerable is your company and while we are at it, your industry to the potential for large experience modification factor increases?

Step one to control your mod factor is to control the existence of any losses in the first place.  This means prevention is your number one cure.   But the focus of this article is to look at things that you can do once you’ve had an accident to help reduce the negative impact of that loss on your mod.   When I look at the formula, and how it is calculated, it becomes increasingly obvious that you should try and get all injured employees back to work before the disability waiting period (7 days in NC) runs out.  This is because the mod formula applies a 70% discount to all medical costs for claims that have no disability component.  Once your injured employee starts drawing disability, then the discount goes away and all of the medical costs are now dumped into your mod formula.  You can see why it is so important for you to find a workers compensation insurance company that has the loss control and back to work programs that can help prevent you from owning a claim that has gotten deep into the disability coverage of your policy.

Because all industries are different and have different types of claims, the impact of an effective back to work program varies a bit by industry.   Summit Insurance recently released a study of several industries and the anticipated impact of the mods for businesses in those industries depending on whether or not they were able to access an effective return to work program.  Here’s a sample of some of their results.  If you are in the automotive repair business then an effective back to work program could reduce your mod on your garage workers compensation insurance policy under the new formula rules by 6 points.  That would be a savings of $600 per year on a $10,000 policy for every claim that you have.  Landscapers workers compensation insurance policies will average a 3 point reduction as do electricians workers compensation insurance policies and workers compensation insurance policies for HVAC contractors.  Plumbers are likely to see a 4 point reduction and restaurants with workers compensation insurance policies could enjoy a 6 point mod reduction per claim for choosing a workers compensation carrier with an effective back to work program in place.

These numbers reveal once again that choosing a workers compensation specialty company with their associated loss control and back to work programs can save you a substantial amount of money in the long run by helping you keep your experience modification factor lower.  Generally I advise people to place as many of their policies with the same insurance company for the best treatment and lowest rates.  But workers compensation is another animal.  Here your rates will reflect your past losses through your experience modification factor and so you will have to live a long time with your mistakes.  For that reason, every business should treat their workers compensation insurance a bit differently and make sure that they choose and agent and a company that have experience in this area.   I would suggest that you to take some time to read the loss control and claims costs control features on the web site for the company that provides you with your workers compensation insurance policy.  Take advantage of what they offer and implement where you can to prevent losses and to get your injured employees back on the job as soon as possible.  If you need any help at all with your workers compensation insurance, please call us, Clinard Insurance Group,  toll free, at 877-687-7557.

Hidden Costs Of Workplace Accidents and Injuries

If you own a business that has operations in North Carolina, then you should buy workers compensation insurance to protect your company from financial losses caused by workplace accidents.  Buying a work comp insurance policy should not be the end of your analysis of  the risks associated with workplace injuries.  As a business owner, you should understand the hidden costs that are associated with workplace accidents as these hidden costs can be enormous.  If you take the time to understand the hidden costs, you will better understand the importance of implementing safety procedures to try and reduce both the frequency and the severity of on the job accidents.

So what is the difference between direct costs and indirect costs related to workplace injuries?  Let’s take a moment to explore each of these costs and how they can impact your bottom line.

We can start with direct costs since they are  the easiest to measure and understand.  Direct costs can include the medical costs for the injured employee, from hospital and physician expenses to pharmacy and physical therapy outlays.   We must also include the compensation payments to the injured worker for loss of income as well as dependent payments and death benefits.  When a claim turns ugly, you can add in legal fees and settlement costs as well.   The workers compensation insurance company will bear most all of the direct costs we have mentioned so far.

The other category of direct costs is the costs that are borne by the employer.  The most obvious of these is the workers compensation insurance premium.  Your company has some limited control over this direct cost when you find lower insurance rates and are able to keep your payroll numbers low.  The other direct cost that an employer could face here are the increase in workers compensation premiums due to past losses.  This is the additional premium that is associated with an increase in your experience modification factor.

What about the indirect costs associated with workplace accidents and injuries?  These  cost will certainly vary from one kind of business operation  to another.   Your business could face higher costs in terms of lost productivity and service standards, the additional costs of hiring temporary labor to replace the injured worker or the costs of paying non-injured workers overtime pay to bridge the gap while your injured worker is recovering.  Your company  might also face the additional costs of hiring and training replacement workers for the injured ones.  And there are accident investigation and administrative follow up costs associated with any work place injury claim.  Last of all, a workplace accident could force your company to face lost sales.

Indirect costs of a workplace accident are generally thought to calculate at 4 times the amount of direct costs in a workplace accident.  We can run a quick calculation that might help shed light on the  magnitude of the indirect costs problem.  Let’s say you have a workplace accident that generates a workers compensation claim of $20,000.  While this seems like a large number, this is not unusual.   This means that your indirect costs would run at about $80,000.  Now if your company has a profit margin of 5% (which is pretty close to an average), then you will need to generate additional sales in your business of $1.6 million to cover the indirect costs of this claim.   These numbers just cannot be ignored.

Your takeaway as a business owner is that reducing the frequency and severity of workers compensation claims is a critical link in your profit equation.  So what should you do?  I would suggest that you choose an insurance company that specializes in workers compensation insurance only when you buy your next workers compensation policy.  These specialty companies have real world expertise in claims management as well as loss control programs.  Often they offer these loss control programs at no charge to their policyholders.   At Clinard Insurance we write workers compensation insurance for hundreds and hundreds of small businesses all across North Carolina and South Carolina.   If you would like help with your workers compensation insurance as well as help getting your workplace accident indirect costs under control, please call us, toll free, at 877-687-7557 and we will put our experience and know how in this area to work for you, saving you money and helping you reduce your workplace accidents.

Workers Compensation Insurance Rates Under Stress From 2011 Results

2011 was a tough year for most insurance companies out there.  This is mostly due to the more than $50 billion in property related claims from storms and bad weather events all across the country.  Of course workers compensation claims are not much affected by weather events, yet the 2011 numbers for the workers compensation insurance industry are not good.  And when the insurance industry loses money, that almost always portends higher rates for business owners in the near future.  This article will highlight some of the bad numbers that point to higher workers compensation insurance rates for the coming year.  Then I will show you how you can avoid facing higher rates this year for your business.

First look at some of the numbers.  In 2011, there was a 3% increase in the frequency of lost time claims.  These are claims where the insurance company is paying the injured worker a salary while the worker recovers from an injury.  3% may not sound like much, but this is the first time since 1997 that this measure increased from the previous year.  Is this a one-time blip or a signal for changes ahead in workers compensation lost time claims?  I think it may be the latter.

Compounding this problem is the unsettling result that net written premium for the insurance companies declined by 1.3% in 2011.  Now it doesn’t take a genius to understand that when claims are going up and premiums are going down something has to give somewhere.  I believe the breaking point will be the rates that you pay for your work comp insurance policy.  Insurance companies measure the money that they take in against the money that they pay out for claims.  This calculation is referred to as a loss ratio.  If the loss ratio rises above 100%, then the insurance company has lost money.  In 2011 the industry wide loss ratio for workers compensation insurance in the U.S. increased to an astonishing 118.1%.  This is the highest level since the year 2000 when it was 121%.  This means that in order to break even, the insurance companies need to average 18.1% return on the money that they hold while waiting to pay claims.  There are not many places where you can find a safe 18% return out there.

So what is the cause of these deteriorating results?  There are several of course, and none of them seem to show any signs of letting up in the near future, which is why I am predicting higher workers compensation rates across the board.  The biggest elephant in the room is the rising costs of medicine which now accounts for 60% of the workers compensation total claim payout.  With medical inflation running at 6% this part of the problem is going to be with us for the long haul.  Poor economic conditions are also a factor as there is a greater tendency for fraud in bad economic environments.  Also, the work force is getting older and more obese each year and this puts a strain on the claims costs both from a frequency of loss and a severity of loss perspective.

So what can you do to keep your work comp rates as low as possible in 2012 and beyond?  I suggest that you begin by taking a good look at your work comp policy and your work comp insurance company.  There is a growing market segment of work comp only companies out there today. These are companies that specialize in workers compensation only.   They don’t write auto insurance or home insurance or life insurance, they write only workers compensation insurance.   These companies understand that to make money in this business and to keep rates low for their customers, they need to be much more proactive in the prevention of claims as well as the recovery process.  They typically have loss control programs that can help you prevent claims from happening.  They often have nurses and claims case workers on staff to double check all medical bills for errors and fraud and to help your injured worker heal and get back to work as quickly as possible.

At Clinard Insurance Group we want all insurance buyers to be informed insurance consumers.  We can help connect you with a specialized workers compensation insurance company so that your rates can remain lower even while your competitors face huge workers compensation insurance rate increases.  If you have questions about your work comp insurance, or if you would like a quote to see just how much you can save on your workers compensation insurance, please give us a call, toll free, at 877-687-7557.  We look forward to hearing from you soon.

Workers Compensation Insurance – What About Your Safety Program

Workers compensation insurance for many industries, especially those in construction such as painting contractors, HVAC companies, electricians, landscapers and plumbers just to name a few, can be a huge piece of the insurance budget. In addition, with workers compensation insurance in NC, your policy is experience rated, which means your losses follow you around for years and add to the cost of your particular policy. So why don’t more contractors embrace safety training?

The answer of course is complicated but one of the biggest reason you see so little safety training in the small contractor’s world is that either the contractor doesn’t understand how much it can impact his bottom line, or if he does, he just doesn’t know where to start. This is where company selection can be crucial to the small contractor. There are some companies out there that specialize in workers compensation insurance and don’t deal in any other types of policies. One of the advantages of using these types of companies is that often they will provide you with lots of safety training tools for free.

These tools can range from helping you meet posting requirements in your shop to advice and help with safety services and even helping you develop and create a true, on the job safety training program for all of your employees. One example of a company that does this very well is Summit Insurance. Take a quick look at the offerings that they have on their web site by clicking here. You can see that they are fully engaged with their clients to help them find ways to reduce accidents and downtime associated with injuries.

Let’s face it, when you have a workers comp claim it will cost you money on your policy eventually. But more importantly, think of the immediate costs of stopping work to get your injured employee to the doctor and the downtime associated with waiting on an employee to get back to work. A large percent of accidents that occur on construction sites are preventable with better education and better rules enforcement. If you are already spending money on a work comp policy, you should ask yourself what your insurance company is doing to help you reduce and prevent accidents. Remember, there is much more to the workers compensation policy than just the rate, or the bottom line price. As you can see, there are huge hidden costs in the process and you need to hire a workers comp company that will help you manage those huge hidden costs.

Clinard Insurance Group is a NC insurance agent who specializes in helping small contractors and construction trades all across North Carolina. We understand your difficulties and we speak your language. We have developed specialty programs for all different types of small contractor groups including a landscapers insurance program, and electricians’ insurance program, a special insurance program for painters, an HVAC insurance program, a plumbers insurance program and many others. If you need help with your business insurance, please call us toll free at 877-687-7557 or visit us on the web at www.thecontractorshelper.com.

This article was pulled and written from source information, all of which may be found in its entirety at www.InsuranceAnswerGuy.com.

NC Work Comp Insurance – Not All Rates Are Created Equal

If you have a business with employees in NC, then chances are you are have at least a passing familiarity with work comp insurance and how it is set up. In my conversations with lots of different types of business owners all across North Carolina, I have found that many wrongly assume that workers compensation rates are the same from one company to the next. Nothing could be further from the truth. This article will go over the rating process and how the rates are established and what this means for you, the business owner and insurance consumer.

Let’s start with the easy part, the policy coverage itself. In NC, all workers compensation policies have the same coverage form. The coverage is statutory, which means that it follows the current NC workers compensation statutes. Therefore, with the exception of a few items, all policies are basically the same. The rates however, are not the same.

Each insurance company has to file their rates with the NC Rate Bureau for each different classification of labor that they write. And while company A may love to insure landscapers and their rate would reflect that, company B may not want to write this class of business, so their rates might be higher for that classification.

So what does this mean for you? Well, if you own a business in NC and are buying workers compensation insurance, then you should take some time to understand the marketplace and make sure that you have purchased your coverage from a company that is eager to write your business and has the rates to reflect that eagerness. Also, in the past it may have been wise to always place your workers compensation insurance with the same company that handles your general liability insurance, your business auto insurance or your commercial property insurance. The workers compensation marketplace in North Carolina has changed quite a bit over the past 15 years and now there are many insurance companies out there that write only workers compensation insurance. We call these monoline work comp companies and they are a good choice for lots of NC business owners because the are not only able to offer very competitive rates on the classes of business that they want to write, but also, they often have loss control and back to work programs that are more effective and more helpful to small businesses.

At Clinard Insurance Group in Winston Salem, NC, we specialize in helping small businesses all across NC with their workers compensation insurance policies. We have created special insurance programs for plumbers insurance, HVAC insurance, carpenters insurance, painters insurance, restaurant insurance, floor and tile installers’ insurance, landscapers insurance and electricians insurance. If you need help with your workers compensation insurance or any other insurance policies, please feel free to call us, toll free, at 877-687-7557 or visit us on the web at www.ClinardInsurance.com.

The source information for this article was pulled from other articles which can be found at www.InsuranceAnswerGuy.com.

Electrician Work Comp Insurance – Pay As You Go, Saves The Cash Flow

Electrician insurance plans should all include a workers compensation policy unless of course you work alone and have no employees. And work comp policies can really punch a hole in your cash flow if not handled correctly. For more information on this, read my blog on the audit trap. In addition, there come times when work is hard to find and you may experience a drop in your cash flow. What if there were a program that would adjust your premiums to match your current work load and cash flow?

In fact this program exists and is available today. With a little understood tool called pay as you go, you can have your income cash flow better match your workers compensation premiums. Now understand that not every company that writes workers compensation policies for electricians can or will offer this feature, but if you can find one that does and if their price is right, this can be a nice benefit for electricians.

Let’s look at the mechanics of this type of work comp plan. Of course the details will vary from plan to plan, but the very best of them will send you an email or a mail reminder each month. You then log on to their web site and enter your payroll totals for the past month. The web site will then calculate your premium for that month and you can pay your bill on line right then and there with a credit card, or the system will generate a paper bill which is mailed to your office. What this means for you is that now your workers compensation expense tracks your payroll with only a 30 day delay. And this short delay means that your workers compensation expenses will more nearly track your revenue and mean less wild swings in your monthly cash flow.

Ok, there are a few things to watch out for here. First of all, there are some payroll service companies out there offering pay as you go workers compensation to go with their payroll service. On the surface this sounds great but there is a problem with this approach. One huge factor in your workers compensation insurance costs is your experience modification factor. And you need to work proactively to protect that mod to keep future costs lower. Companies that specialize in payroll services and sell work comp as a sideline are rarely as good at keeping claims costs low as companies whose prime mission is workers compensation insurance. These dedicated work comp companies will often have nurses and case managers on staff to help reduce your overall claims costs. And keeping your claims costs low will keep your rates low over time. To learn more about this read my blog on protecting your experience mod.

One last thing to mention here is that the pay as you go feature offered by some companies is often only available to electricians whose premium exceeds a certain level, often as high as $5000. There are a few companies out there who can offer this feature at a much lower premium level, but you will need to find an agent who specializes in electrician’s insurance to find them.

At Clinard Insurance Group, in Winston Salem, NC, we are the electrician insurance specialists. We have companies that can write pay as you go workers compensation policies for electricians with annual premiums as low as $1000. If we can help you with any of your electrician insurance policy questions, please call us, toll free at 877-687-7557 or visit us on line at our electricians’ insurance program policy page.

Some of the source material for this article was drawn from other blog articles which can be found at www.InsuranceAnswerGuy.com.

Construction Insurance in NC – small contractors, don’t forget your work comp insurance

I hear it so often with artisan contractors, they don’t think they need workers compensation insurance because they have too few employees or the general contractor that they work under provides that coverage. While these are reasons that allow them to legally avoid buying a policy, in both cases they leave the artisan contractor’s destiny in the hands of others and may ultimately cost the small contractor his or her business. Here’s the real scoop on workers compensation insurance in North Carolina for small contractors.

It doesn’t matter which area you work in, whether you are hunting for painter insurance, plumbing insurance, lawn care insurance, carpenter insurance, landscaping insurance, grading insurance or even insulation or flooring insurance, you really will do better to always purchase a work comp policy for your small contractor business. Let’s take a look at the three reasons people don’t purchase workers comp insurance for their small business.

Reason #1 - Less than 3 employees. While it is true that in North Carolina, if you have less than 3 employees, then the state will not require you to purchase a workers compensation insurance policy, what is seldom said in the next sentence is that whether or not you buy insurance, you are still on the hook for the claims. The workers compensation insurance policy was created as a compromise. Workers gave up their rights to sue their employers in most cases and the trade off for them was that employers agreed to pay the benefits associated with injuries and sicknesses on the job according to the statutory payouts required by each state. So, as the employer, you will have to pay for your employees job related injuries, sicknesses and time out of work in accordance with the NC workers compensation statutes. If they are permanently disabled or even out of work for several months, these costs could run into the tens of thousands and possibly close your business. Many small contractors are choosing not to buy workers compensation insurance based on their number of employees and this could have a devastating effect on their business.

Reason #2 - It costs too much. Let’s face it, workers comp insurance can be expensive. But if you have an agent that specializes in your type of business, then you will have a much better chance of getting your policy set up in a way that saves you the most money while still protecting you from financial ruin. And really while the short term costs may seem high what is your entire business worth?

Reason #3 - The general contractor covers it. While for some small contractors, this may be true, there are several reasons why this is a poor choice. First of all, if the general contractor were to go out of business, or let their insurance cancel through some error, then you are back on the hook and if the claim is large enough, then there goes your company. Also, if you do work not associated with that contractor then you are back to going bare. Secondly, most general contractors add a large premium to the rate that they are charged to carry you on their policy so you will probably find you are paying more than you should to be covered this way.

In almost every case, it is a better choice for small, artisan construction companies to purchase their own workers compensation insurance policy directly. The risks associated with going bare, or riding on the general contractor’s coat tails are just too high.

At Clinard Insurance Group in Winston Salem, NC, we specialize in helping small artisan contractors of all types with their insurance needs. We have special insurance programs designed for carpenters, carpet cleaners, concrete and masonry construction, electricians, flooring installation companies, grading and excavating contractors, guttering and siding installation companies, HVAC companies, landscapers and lawn maintenance companies, painters and plumbers. We work hard to help all of our clients become informed insurance buyers. If we can help you with your business insurance needs, please call us, toll free, at 877-687-7557 or visit us online at www.TheContractorsHelper.com.

The source information for this blog article was pulled from information which can be found on line at www.InsuranceAnswerGuy.com

Contractors – Prepare For The Impact Of Your Uninsured Subcontractors

Uninsured subcontractors are often just a necessary evil in some types of construction jobs. But if you are the contractor who is hiring extra help, and this help is uninsured, you should know what you need to do on the front end to be sure that this cheap labor option doesn’t turn out to be the most expensive help you’ve ever hired. Understanding exactly how uninsured subs will affect your general liability insurance policy and your workers compensation insurance policy is key to reducing your risks and your costs. At Clinard Insurance Group in Winston Salem NC, we specialize in helping all kinds of contractors with their construction insurance policies. And we want to make sure that all of our insurance clients avoid the nasty surprises that often come along with hiring uninsured subcontractors.

There are really three ways that the subcontractors that you hire that have no insurance policies in force can hurt you. The first is the classification audit trap. The second is the insurance coverage punch, and the third is the out of control large loss problem. Let’s take them one at a time.

First up is the classification audit trap. Two of the main insurance policies for contractors are the general liability policy and the workers compensation policy. The North Carolina general liability policy and the North Carolina work comp policy both compute the premium due by using payroll as the rating basis. If you hire a subcontractor to work for you, you can provide a certificate of insurance for that subcontractor and anything that you have paid that subcontractor will not be charged against you as payroll at the end of your policy term when the policy is audited by the insurance company. Likewise, if you can’t provide a certificate of insurance for that sub, then you are going to have to add the entire job cost paid out to that sub as payroll. You can protect yourself against this going in by withholding an amount for insurance from the payment you make to the sub. But, beware, the general liability policy and the workers compensation policy both have different rates for different kinds of work. If you are a carpenter and you hire a roofing contractor to work for you to do roofing work, you won’t be protected from the audit trap by using the rate shown on your policy. That’s because the rate for the roofer is much higher than that for a carpenter. If you are unsure of what to withhold, either demand that your sub get insurance, or call your agent to find out what the correct amount per $100 of payroll should be withheld. As you can see, this is a tricky business and if you don’t pay attention to the details and do your homework, you will get burned and will be overpaying for your general liability and workers compensation policies.

Now let’s take a quick look at the insurance coverage punch. Hiring an uninsured subcontractor is a big no no from the insurance company underwriter’s viewpoint. This is because the underwriter immediately assumes that you don’t have the same control over a subcontractor that you do over your own employees. This means that losses are more likely from an uninsured subcontractor. The underwriter will view your uninsured subs as big liabilities that make you a less attractive risk to the insurance company. This means that when your audit comes in with uninsured subs listed, the underwriter will be less generous with discounts and you may actually see your rates go up for all of your insurance policies from you commercial auto to your general liability to your workers compensation policy. Once again the real message to you is that you should not hire uninsured subs.

Last of all, we have the out of control large loss problem. While you might want to argue against it, statistically is it true that you have less control over your subcontractors. And that not only means that they are more likely to cause losses on your policies, it also means that they are more likely to generate losses which are not covered by your policy. Does your policy have an exclusion for the type of work they are doing? Will the losses they cause exceed your coverage limit? The answer to both of these questions could well be yes. Ask yourself why your uninsured subs don’t have insurance protection. Is it because they are deemed uninsurable by underwriters? If so, why are you letting them have a free ride on your policy at the risk of damaging your ability to purchase insurance in the future?

The truth is that hiring an uninsured contractor to work on your projects is risky and in some cases just plain costly. If you can avoid this type of practice you will be better off from and insurance standpoint every time. At Clinard Insurance Group in Winston Salem, NC, we work hard to make sure that our contractors understand the ins and outs of their policies and the best practices they should put in place. If you have any questions about workers compensation insurance, general liability insurance or any other business insurance policy, please feel free to call us, toll free, at 877-687-7557 or visit us on the web at http://www.ClinardInsurance.com.

The source information for this article was drawn from the informative blogs at www.insuranceanswerguy.com