Eight Secrets to Lower Workers Compensation Costs

Workers compensation pricing is a very complex mechanism with many moving parts.  The price you pay is more than just the state rate for your specific class code. Baked into the final price you pay are the following: reserve changes, experience modification factors, misclassifications, audit mistakes, frequency, severity, etc., and the list goes on.  Here are eight secrets to lowering workers compensation costs on us.

Secret #1 – Choosing the Right Insurance Broker

For over 25 years, Hanlon Insurance has provided a high level of expertise in the field of workers compensation cost containment. Small and mid-sized businesses in the tri-state area have greatly benefited from our customized process for reducing costs.
We understand that to truly cut costs, reduce injuries, and mitigate losses, a customized plan must be constructed and implemented to see results.
Hanlon Insurance has been trained by the absolute best workers comp educators and innovators in the country, The Institute of WorkComp Professionals and Oceanus Partners, led by the nation’s foremost authority on workers compensation Frank Pennachio.

Secret #2 – Workers Compensation insurance does not pay for employee injuries. You do!

Do you realize that you pay $2 to $3 back to the insurance company for every dollar the insurance company pays out for your employee injuries? Each claim results in the most expensive financing contract you have in your business. Indirect costs are a huge component of a claim and often go unseen by the business.
In addition to your current premiums, you must pay for the following:

  • Increased cost because your Experience Modification skyrockets
  • Lost productivity
  • Reduced morale for the unhurt employees who fill in for the injured employee
  • HR costs of hiring a new employee

Secret #3 – Claims Management Services are less than perfect.

Claims adjusters are inundated with too many cases. If you are not holding regular meetings with your claim adjuster, your injured employee will not get the attention he or she deserves. The squeaky wheel gets the grease. You must be proactive in claims management.
Relying solely on the insurance carrier to handle the claim to your benefit is a losing proposition. You just can’t notify the insurance company of an employee injury and expect them to “do their job.” You must have a proven process in place to minimize the cost of the injury and expedite your injured employee’s return to work.

Secret #4 – Audits are notorious for mistakes and overcharges. 

You’re at a disadvantage from the start. The insurance company auditor knows the rules, you don’t. The auditor is not compelled by law to explain the rules, especially if applying a rule that would cause you to pay a lower premium.
You are penalized and overpay when the Auditor makes a mistake on your audit. Because your final insurance cost is determined after your policy expires, it is essential the audit is correct.
Here are a few examples of how the Audit process works against you:

  • Auditors are overbooked and more than likely outsourced to third parties.
  • Auditors have no interest in educating you to keep your costs down.
  • Auditors step in and pick an Audit Trail (Which one?).
  • When in doubt, Auditors will put all payroll in the highest rated class.
  • Auditors may or may not ask for “Excluded payroll”.
  • Auditors are motivated to get in and out quickly.

Secret #5 – Up to 47% of Experience modification factors are wrong or mismanaged. 

Many business owners don’t know what an experience modification factor is, how it works and how it can add tens of thousands of dollars to their premium. Therefore “shopping” a work comp policy will never result in any significant savings. If you don’t know why 18 months after your renewal date is the most important date on your work comp calendar, then you are most likely overpaying for your insurance.

Secret #6 – Hiring Practices

A woman and a man interviewing another woman at a table with paperwork and a coffee cup on the table.

A very small percentage of your workforce is responsible for a very large percentage your Workers’ Compensation Costs.  Proper hiring practices are one of the keys to keeping work comp costs down. You never want to “hire a workers compensation claim.” We have seen many businesses not do their due diligence and end up hiring someone who is not fit for the job description and ends up in a costly workers compensation claim.

Secret #7 – Uninsured Subcontractors can sink your business!

The subcontractors you hire must have the proper coverage and can become a huge liability if there is a claim. Uninsured subs are just a time bomb ready to go off. They will cost you a lot of money in potential lawsuits as well as huge increases in your premium. Proper record keeping is a must.

Secret #8 – Having a documented process for managing your workers compensation program.

Most people who call us, tell us their biggest frustration with their work comp is that they feel powerless to do anything about it. As an owner, you face many business problems, workers compensation should not be one of them.
Hanlon Insurance Agency, LLC takes the frustration out of workers compensation insurance by providing a road map to lower premiums. Our process for lowering workers compensation costs will have you will be back in the driver’s seat.

Ready to Lower Workers Compensation Costs?

What’s the next step? Call us at 973-909-9889 ext. 102 or visit our contact us page to set up a brief 10-minute exploratory call to learn more and if the next step makes sense.