Workers Compensation Insurance Mod Is Changing – Is This Good For You Or Bad For You?

Beginning in 2013, the National Council on Compensation Insurance is changing the formula used to calculate your business’ workers compensation insurance experience modification factor, called your experience mod, or just mod for short.  The results of these changes across all industries is designed to be revenue neutral overall, but taken one business entity at a time, this change will either be a win or a loss for you and your work comp insurance premiums.

So what is the change?  The formula is complicated and involves two parts, one designed to measure your actual primary loss costs against the expected loss costs for a business of your type and size and one to measure the excess losses against expected excess losses.  By far, the most impactful section of this formula is the section calculating your primary loss ratio.  As of today, this side of the formula only considers the first $5000 of each loss.  The remaining amount over $5000 is shifted to the excess loss side of the equation which has a much lower impact on the size of your mod.  The cut off for how much of a claim is considered in the primary loss cost is called the split point and has been set at $5000 for over 20 years.  Beginning with mod calculations in 2013, this split point is going to be increased steadily each year from $10,000 in 2013, to $13,500 in 2014 and on to $15,000 in 2014.  After that, the split point will be adjusted for inflation on a yearly basis.

So how do you calculate if this mod formula change is a winner or a loser for you and your business?  First you need to understand that for the 2013 mod calculation, the NCCI will be looking at your claims for the 2009, 2010, and 2011 policy years.  This is because the NCCI wants to give each claim enough time to settle and that leaves a big lag time in how a claim impacts your premiums.    Take a look at your loss history during those policy years and determine how many of those claims paid out more than $5000 for losses occurring during that time.  If all of your losses have a total payout of less than $5000, then you will likely see your experience mod factor fall to a lower number.  If, however, some of those losses exceeded $5000, then you will likely see an increase in your mod next year.

If your mod goes up, that can have two direct impacts on the amount of money you pay for workers compensation insurance.  The first impact is clear, your modification factor is a multiplier on your policy that increases or decreases your total premium to reflect the kind of loss experience you have had.  When your mod goes up, then so does your workers compensation costs.  But there is a more subtle effect as well.  Many workers compensation insurance companies use the mod factor as a quick way to decide which companies qualify for their best rates, and which need to go into their high risk programs which carry much higher underlying rates.  So an increasing mod may mean that you will have a harder time finding the low base rates for your policy that you may now be used to paying.

Going forward the winners in this new mod change process will be those companies that are able to keep their loss costs lower.  Since by 2015, every dollar of loss costs under $15,000 per loss will flow to the primary losses side of the equation, the part of the formula that can do you the most damage, then it is in your best interest to keep the overall costs of any accident as low as possible.  One of the best ways to do this is to choose a specialized workers compensation insurance company, one that writes only workers compensation insurance.  These companies generally have much stronger loss prevention programs that they can help you implement to keep losses from happening in the first place.  They also tend to have stronger programs to reduce medical fraud and employee fraud as well as programs to get your employee back to work sooner.   All of these techniques have been proven to reduce overall loss costs and now that means a lot more to you than it used to mean.

At Clinard Insurance Group, we help hundreds of small businesses all across North Carolina, South Carolina, Georgia and Tennessee with their workers compensation insurance needs.  We can help you evaluate the impact of these mod changes to you and help you find an insurance carrier that can help you keep your future loss costs lower and thus save you money not just today but year after year in the future as well.  If you would like our help with your workers compensation insurance, please call us, toll free, at 877-687-7557.

Has Your Situation Changed Since You Last Considered A Personal Umbrella Insurance Policy?

One of the most underutilized and least expensive policies designed for families is the personal umbrella insurance policy.  This happens because most insurance buyers are usually more focused on reducing premiums than they are on buying asset protection.  Also, many insurance agents just don’t make this an important part of their coverage discussion when talking with their personal insurance clients.   And even if you don’t feel that you need this policy today, that doesn’t mean that you shouldn’t revisit the idea from time to time.  The truth is that over time, most families will be in or pass through a time where a personal umbrella insurance policy makes a lot of sense for them.

Let’s take a quick look at what a personal umbrella policy is designed to do for you. These policies are designed to increase the protection that you already have on your homeowners insurance policy and your auto insurance policy. They can also add a layer of liability protection to other policies you might have like boat insurance, motorcycle insurance or RV insurance.     Usually they start with a minimum liability limit of $1,000,000 but you can usually purchase limits on up to $5 million or more if you need it.

Where you live can have a lot to do with your risk factors.  Anyone living near metropolitan areas or areas where there are more wealthy people are at greater risk of being the target of a lawsuit.  To make matters worse, the poor economic environment of the recent past has also increased the number of people who are willing to sue you if the opportunity presents itself.  If you cause an accident and injure someone who has recently lost his or her job, or who may feel that his or her job is not secure, then you are now dealing with someone who has good reason to hire an attorney to try and get as much as they can from you while they have a chance.

The need for a personal umbrella policy also changes for most families over time.  This is due to a gradual increase in asset exposure over time as well as the sometimes temporary but very real changes in risk exposure.   Let’s look at these two phenomenon one at a time.

Asset exposure simply refers to the increase in value of your assets over time that give you something to loose and that make you a richer target for litigation.   Most kids out of college have very few assets to lose.  This is often a time in life when they select their auto insurance and perhaps even home insurance agent.  They may reject the notion of an umbrella policy then because they really don’t have much to lose.  But over time as they aquire retirement accounts, pay down the house mortgage and build up savings, these same people now have a different asset exposure.  If they don’t make a change to their insurance portfolio and purchase an umbrella policy, then they risk losing it all to one bad accident.   Buying an umbrella policy for a few hundred dollars a year would be a much better choice for them than leaving all of their hard earned assets at risk to the greed of an injury attorney and his client.

Increased risk exposure can also slip into a family’s life literally overnight.  The best example of this is the day your teenager gets his or her license.  Now you have a driver with very little experience out on the roads,  driving a car titled in your name and all of your assets are now on the line if they make a mistake.  Imagine your 16 year old reading a text while hurtling down the highway at 70 miles per hour.  This little scenario could really change your financial situation for the rest of your life if you haven’t prepared for it with an umbrella policy.  The day my oldest child turned sixteen, I doubled the amount of coverage  on my personal umbrella policy.

At Clinard Insurance Group we want all insurance buyers to be informed consumers.   We insure thousands of families all across North Carolina, helping them keep their assets safe.   If your personal insurance portfolio does not include a personal umbrella policy, then please call our office today at 877-687-7557.  We will be happy to help you analyze your needs and help you find the umbrella policy that leaves you with a feeling of comfort about the safety of your hard earned assets.  

Earthquakes And Your North Carolina Property Insurance Policies – Will They Be Useless To You?

If you have lived your entire life in North Carolina, then earthquakes are probably not something that you think much about.  In our lifetimes, the earth under our feet has not shaken often or dramatically and we have built lifestyles and societies around the concept that the earth does not move under our feet.    But this year and last year are the 200^th anniversaries of the strongest earthquakes ever to occur in the continental United States.  These three earthquakes were so strong that they were felt from St. Louis and west all the way into northern New England.  And they happened right in our back yard.

In 1811 and 1812, three earthquakes on the New Madrid fault line were estimated at magnitudes above 8.0.  Aftershocks from these quakes numbered in the thousands and went on for several years.  These three mighty earthquakes were so strong that they caused the Mississippi river to reverse course and flow north for a period of time.  Most of the loss of life from these quakes occurred on the river where boats were capsized by the huge waves created by these quakes.  Most of the property damages occurred to crops where entire fields were churned to soup and rock falls buried fields.   But without the complicated and intricate infrastructure of our time with our underground gas lines and extensive property construction, there were no great fires and no huge loss of life figures to keep these earthquakes fresh in our memories.  For the most part the New Madrid earthquakes of 1811 and 1812 have been largely forgotten.

The New Madrid fault line runs in the vicinity of St. Louis to Memphis but because of the type of subterranean rock on the east coast, tremors and shocks from New Madrid are felt for thousands of miles.  In 1811 the New Madrid earthquake is said to have rung church bells in Boston.  This fact makes those of us living in and owning property in North Carolina a bit more vulnerable than we may think.

Experts now estimate that an 8.0 or higher earthquake originating on the New Madrid fault would probably leave behind damages well above $100 billion.  Yes, that is billion with a B.  In this part of the country we simply have not built for or prepared for earthquakes in the same way as has been done in California and Alaska where earthquakes are more common.   And worse still, most of those losses would be uninsured losses so recovery would be much slower and less efficient.

What does this mean for you?  Start by understanding that in NC, earthquake damage is not automatically covered by the standard homeowners insurance policy.   This is also true for those of you who own commercial property insured by the standard businessowners insurance policy or commercial property insurance policies.  Also, any homes that you own and that you rent to others, usually insured by a dwelling fire insurance policy, will also have no earthquake coverage.  How tough will it be to borrow money to rebuild your home or business when you have to compete with almost every other citizen doing the same thing?

But earthquake coverage is not unavailable, it’s just not automatically included in the standard policy form.  In almost every case you should be able to add earthquake coverage to your existing NC property insurance policies for an additional premium charge.   This coverage is generally more expensive for homes and buildings that are constructed of masonry or brick veneer compared to frame buildings.  This is because masonry structures don’t flex as well with the shaking ground and usually experience much greater damage from earthquakes.  Also, be careful to understand the special deductible forms that often apply to earthquake insurance.  Many even calculate the deductible that you must pay after a loss as a percentage of the total damage caused to your property by the quake.

With the 200^th anniversary of the strongest earthquakes ever to occur in the continental US here before us now, some might feel that having gone this far, we will never see one.  But seismologists will tell you that every year that passes without a New Madrid fault quake, simply increases the odds that it will happen next year.  Going without protection is much easier than getting it.  All you have to do to be uninsured is do nothing at all.  But if you would like some help in understanding your options for earthquake insurance on your North Carolina property, I hope you will give us a call, toll free at 877-687-7557 or visit us on the web at www.ClinardInsurance.com.

Mono-line Workers Compensation Insurance Companies – What Is It They Can Do Exactly?

Readers of my blog know that preach buying your workers compensation insurance policy from an insurance company that sells only workers compensation and no other types of policies.  This is because I have found that with their expertise and understanding of this insurance product they can reduce claims costs, and help get your employees back to work more quickly.  All of this helps them keep their rates low and save you money on your first policy with them as well as on your renewal policy.      Today I want to drill down deeper into this issue and help you understand what these extra services are and why they will cut your claims costs and save you money on your workers compensation insurance rates.  That way, when you are considering one of these insurance companies for your business, you will know which questions to ask.  Take it from me, not all of these mono-line workers compensation insurance companies are created equally.

To start, consider how these insurance companies often have an in depth medical bill review process for all medical claims.  The most talented at this have found that there are huge savings to be found simply by reviewing and challenging the medical bills themselves and their tricky coding.  Applying national guidelines for coding edits can often reveal huge savings by stopping some of the catch all codes where billing inaccuracies are often dumped.  One insurance company recently reported that unbundling overcharges found by in house bill reviews saved 49.8% on medical costs for an average claim.  Carefully applying medical limits and rulings to fees also generated savings of 38.46% on physician fee schedules.    Verifying the diagnosis according to medical records and examining medical records to ensure bill coding accuracy saved additional money on the medical portion of claims.

Now let’s take a look at some of the service options that have also proven to reduce the costs of workers compensation claims.  Companies that offer an online notice of injury and fast claims reporting have seen huge reductions in claims costs.  To learn how fast reporting cuts claim costs, read my blog on that topic here.   Another money saving approach has been to assign one claims adjuster to each company for all claims.  Imagine how having the same claims adjuster on every claim will cut down your time in claims processing and help you build a relationship with someone who will be working hard to help you reduce your claims costs and prevent claims from happening in the first place.  Implementing  proactive return to work programs that get the employee back to work in some kind of capacity sooner have proven to save the employer money both in terms of claims costs but in down time and replacement worker costs.  This not only shows other employees that you care about them, this also has the added benefit of getting the injured employee back to work full time much more quickly.    And many of these insurance companies employ highly trained and very experienced special investigation units.  These units investigate possible fraudulent claims to control unnecessary expenses associated with these kinds of claims.

Many employers who stumble on to a mono-line workers compensation insurance company to protect their business may only see the lower price on the front end.   And that can be a trap as often a mono-line workers comp company may come into a state with lower rates in an attempt to buy up business before raising their rates in years 2 and 3.  But to save you money today and tomorrow, an insurance company needs to be proactive in implementing techniques and training that will help reduce the frequency and severity of future claims as well as to reduce the costs of a claims that have already occurred.   

At Clinard Insurance Group we represent several fine mono-line workers compensation insurance companies that can save you money on your workers compensation insurance both today and tomorrow.  We insure hundred and hundreds of small businesses all across North Carolina and South Carolina.    If you would like help with your workers compensation insurance policy, please feel free to call us, toll free, at 877-687-7557.  

Work Comp Insurance Claims – Quick Filing Save You Money

Recently a study by The Hartford Financial Services Group found that the longer a business waits to file a workers compensation claim, the more that claim will cost.   This direct correlation is no surprise to me; I work in the insurance industry and see the effects of delayed claim reporting frequently.   However, for many businesses this correlation may not be so obvious.  And an even greater number of companies may not understand how higher claim costs will come back to bite them in insurance premiums down the road.  

A common first reaction to this study by many business owners and CEOs might be that they don’t really care about inflated claims costs because the insurance company is paying the claim, not them.  But higher claims costs in workers compensation will affect your rates both directly and indirectly and with delayed reporting also come lower productivity and fines levied against your company.    The indirect cost to your company are driven by the simple formula that the more money that every insurance company has to pay out in claims each year, the higher the rates will be for everyone the next year.  There is a more direct impact for business though.  Workers compensation is an experience rated insurance policy so this means that your loss results this year will show up in your own rates in future years by way of your experience modification factor.  The truth is, the higher your claims costs are now, then, the higher your work comp premium will be in the future.   The link to your experience modification factor is direct and undeniable.   It is important then for you to understand every way that you can reduce the amount paid out for your company’s workers compensation insurance claims.  And quick reporting is a simple fix for most companies.

The Hartford Study shows that the costs of delaying the reporting of a claim beyond the day of the accident increases the costs of the claim by greater and greater amounts as more time passes.  For example, the study reports that filing a claim between 7 and 14 days after a an accident occurs results in an average of 18% more paid for that claim than if the claim had been filed on the day that it happened.  Waiting 15 to 28 days will increase the costs of that same claim by an average of 30%.  Wait 29 or more days and you will see claims costs jump by 45%. 

To better understand why this happens, let’s take a quick look at some of the reasons why early reporting reduces the costs of claims.  Early reporting allows the insurance company to control the medical costs of the claim by directing the appropriate treatment and care for the injured worker.  Early reporting also reduces the duration of a claim’s total activity, which cuts down on the claims handling costs incurred by the insurance company for that claim.  By shortening the claim cycle, the insurance company can get your employee back to work sooner and this reduces your lost productivity.  Quick reporting also allows for better fraud detection and also reduces the chances of attorney involvement.  I don’t have to tell you why involving an attorney almost always drives up claims costs do I?

Looking at it from the other side, there are also a number of reasons why late reporting increases the totals costs of a workers compensation insurance claim.  Late claims reporting can often turn minor injuries into much larger ones with higher settlement costs.  If the insurance company is brought in late on a claim, then often you miss out on the chance to take advantage of the insurance company’s negotiated medical provider fees.  This almost always results in higher medical costs.  And don’t forget that you as the employer could face significant state fines for delayed claim reporting.

You should take some time to make sure that your managers have an established claims reporting process that kicks into action the minute you have a workplace accident that injures an employee.  Setting this up in advance and monitoring it to make sure that it is functioning effectively can save your company in lost productivity, fines and higher work comp insurance rates.  This is a simple way to save your company significant money.

At Clinard Insurance Group, we are  a full line, independent insurance agency located in Winston Salem NC.  We are very active in the workers compensation insurance market and we insure hundreds and hundreds of businesses all across North Carolina and South Carolina.  We would be happy to answer your questions about workers compensation and help you find a policy that will save you money, not only today but for years to come.  Please call us toll free, at 877-687-7557 or visit us on the web at www.ClinardInsurance.com.

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.

Garage Liability vs Garage Keepers Insurance – Confusing Terminology?

Most auto dealers are scrappy entrepreneurs with a lot on their plate.  These are independent business people with no real safety net beyond their own wits and cunning.   To survive and prosper, they need to understand the market value of many different types of vehicles and be able to find and deliver those cars to a fickle public who rarely trusts them.   With all of this going on, they still have to be garage insurance experts at the same time.  That’s a pretty tall order and confusing terminology doesn’t make things simpler for them.

Garage insurance is an outlier type of policy in the insurance world.  Garage insurance has such a specific function and is used for such a small percentage of businesses out there that most insurance agents just don’t understand it well.  A great example of this is the terms garage liability and garagekeepers insurance.   These terms, though they sound similar, have very different meanings and it is important for the savvy car dealer to clearly know the difference between these two terms and how these coverages may or may not be needed to properly protect his or her dealership.

 Garage liability is the term that applies to the liability exposure associated with your autos and your inventory.  For dealers who are only involved in the sale of cars, this is the protection that you must have in order to obtain your dealer tags.  This should be the cornerstone of your dealers insurance program.  The most common insurance claim falling under garage liability happens when someone test drives one of your cars and causes an accident that injures someone else, or that damages some property.  It is easy to imagine how one bad wreck that puts a few people in the hospital could bankrupt most small dealers.  So you should always purchase the highest limits that you can afford when you are considering your garage liability insurance for your dealership.

Garagekeepers insurance is quite different from garage liability insurance.  Garage keepers insurance is for those dealers and repair shops that take in cars owned by others and perform repairs on those vehicles.  While both repair shops and dealers will need garage liability, the garagekeepers insurance is only needed if for those companies who work on vehicles that are owned by others.  While these cars are in your care, custody, or control, you can be held liable for damages to these vehicles.  For instance, if you work on a vehicle, then test drive it to discover the problem or to listen to a noise, then you could be involved in an accident that damages the customer’s car.  In that case you would need garagekeepers collision insurance coverage on your policy to protect you from having to pay for these damages out of your own pocket.  Garagekeepers insurance also has another subcategory of protection, called garage keepers comprehensive coverage.  This is protection for losses to the vehicles in your care custody and control that are not caused by collisions.  There are exclusions to this coverage, so be sure that you are familiar with them but  basically this is wind, hail, fire, theft and other losses of that nature to your customer’s cars that are left  with you for repairs.

Garage insurance is complex with many options to be understood.  And the number of insurance agents out there who will pretend to understand this coverage and will be happy to try and learn about it at your risk is astounding.  It is truly a mine field out there for dealers.  You need to select and agent who understands this complicated sector of the business insurance world and who already insures lots of other dealerships like yours.  Clinard Insurance Group currently insures over 300 used car dealers across the states of North Carolina, Georgia, South Carolina, Tennessee and Virginia.  Our experience in this area, along with our volume of accounts means that we can help you get the protection you need at rates that will astound you.    If you would like help with your dealers insurance, please call us, toll free, at 877-687-7557 or visit us on the web at www.TheAutoDealersHelper.com.