Whether a business is just starting up or starting to look at expenses, workers compensation insurance might seem like just another cost of doing business. Some employers treat it like any other insurance they’ve had. They’ll pick the cheapest option – and hope they never need it. But work comp insurance is key to protecting your business. It also protects one of the biggest investments employers make: their employees.
On this episode of the WorkSAFE Podcast, we’re joined by Christian Delozier. He is a Proactive Business Risk & Insurance Consultant for Mike Keith Insurance, Inc. Delozier has been with the company for almost 19 years and specializes in helping businesses control and manage work comp costs.
First, we’ll talk about how employers – and employees – benefit from work comp coverage. Then, we’ll share three areas that shape a work comp policy. Finally, we’ll discuss what to look for when choosing an insurance agent or work comp provider.
Listen to this episode on the WorkSAFE Podcast, or read the show notes below.
Work comp: An area where employers have a say
Insurance coverage covers the unexpected. As an insurance professional, Delozier sees employers face uncertain situations all the time. It’s part of the reason he went into work comp. “It’s very difficult to control wind and hail,” he shared. “There are many things that happen to businesses that they don’t have much control over, but work comp isn’t one of those things. They have more control than they think.”
What is work comp insurance?
Work comp is a part of property and casualty insurance. It protects a business, and its employees, in the event of an on-the-job incident. For most states, work comp coverage is mandatory. But Delozier helps employers focus on the benefits it can provide.
“In the state of Missouri, if there’s an injured worker, and they have workers compensation, that is the exclusive remedy,” he explained. Work comp shields a business from potential litigation. It also provide essential medical benefits for employees. Unlike health insurance, there are no co-pays or deductibles. “None of that applies in the event of an injury,” Delozier added. If an injury happens on the job, then 100% of the injured worker’s costs are covered. A work comp policy also covers the time lost when an employee can’t work. If the injury is serious, or even results in death, it provides financial coverage for that, too.
3 things that impact your work comp policy
Without work comp, injuries can cripple a business financially. An employer may even have to close their doors. “There is inherent risk at most places of employment,” Delozier pointed out. Safety risks exists in every industry, from busy constructions sites to quiet offices and school cafeterias. “The simple practice of buying insurance is risk transfer.” When you buy a policy, an insurance company covers the risk of a potential incident. In exchange, the employer pays a cost called a premium. There are three things to consider when getting the right work comp policy for your business.
Every business is identified by a class code. This four-digit number helps sort businesses for work comp coverage. These codes are chosen by the National Counsel on Compensation Insurance (NCCI), a leading insurance organization. There are hundreds of class codes. The important thing is finding the right code for your work. The right work comp provider will help employers determine exactly where they belong.
How many employees do you have? The amount of money you spend on payroll helps price your policy. Your class code will provide you with a rate. This rate is then multiplied per $100 of payroll that you have to obtain a baseline premium cost.
A company’s loss history will play an important role in a final premium decision. Your experience modification factor (e-mod) is used to measure your risk. An e-mod is a calculation that uses your past loss experience to predict your future losses. It also compares your company’s losses to the average company in your industry. A lower e-mod could result in a discount on your premium. A higher e-mod could cause extra costs.
E-mod can be improved over time. This is done through maintaining a safe and health workplace, and managing claims costs. For example, forming a safety team can help lower your e-mod. Creating a safety manual, and holding regular safety meetings, can too.
Audits: Helping to keep your costs under control
An audit is a review of your coverage that happens at least once per year. It means reviewing business records, new employees, and payroll for accuracy. The idea of an audit can spook some employers. However, changes in a business are inevitable. An audit will make sure you’re paying the right premium cost. “75% of all work comp audits have an error on them,” Delozier shared. He recently found an error that saved a client $15,000.
The right agent and work comp carrier can help employers prepare for an audit. Like taxes, a business may owe – or be owed – money at the end. If the business is growing quickly, then money will need to be saved for the extra payroll at the end of the year. Preparing for these costs is very helpful. “It’s never fun the other way,” he added. A surprise bill at the end of the year isn’t ideal.
Work comp: Finding the balance between coverage and affordability
Work comp is one of the biggest decisions you can make for your business. For small businesses, Delozier recommends Trusted Choice. Employers can use the platform to find an agent local to them. Larger businesses are often approached first, especially when it’s time to renew their policy.
It’s important to take your time choosing an agent, and a provider. Delozier recommends looking at designations and previous successes. “Do they have the designations that show these individuals are true professionals?,” he asked. Do you trust the agent or the provider? What strategies do they use to help you find the right policy? How are they going to help you? Take time to ask questions.
Whether clients are looking for their first policy – or a new provider – Delozier encourages them not to settle. The right team can help business owners tackle high premiums and high e-mods. Employers just need to find them. “If you don’t feel like you’re getting the service, or you’re frustrated, don’t be afraid to reach and see if there’s an alternative out there.”