Is your workers’ compensation program for the birds?
Last week I presented on ways employers can improve their workers’ compensation program at the Arizona Small Business Association’s annual meeting. Here are the key takeaways for Arizona businesses who have workers’ compensation insurance.
Don’t treat employees as subcontractors. Many businesses, especially in the trades like plumbing or roofing, make this costly error. This is a priority fix both for your employment tax obligations and for covering your employees under workers’ compensation. In Arizona, all you need is one full- or part-time employee (as defined by the IRS or an administrative law judge) to need workers’ compensation insurance.
Tighten injury reporting protocols. Rapid report to your carrier makes a huge difference in workers’ compensation costs. Back injuries are 35% more expensive if not reported within the first week, for example.
Do you have the best agent for your business needs? Does the brokerage or agency offer tools like Modmaster to help you reevaluate your experience modification factor and pinpoint what each injury costs? If not, maybe it’s time to find a new agent.
How’s your safety culture? Safety begins at the top. Employees can’t push safety uphill. Beginning each meeting with a safety report and forming a safety committee of line employees will make a big difference in your organization’s culture.
Where do you need safety training? Can your agent or insurer provide training resources? Spending a little money for training will save you lots of money (and administrative costs) in the long run.
Do you need stronger hiring practices? Spend money pre-hire by using thorough pre-employment physicals, background checks and testing to eliminate undesirable candidates before you hire them.
Do you know who your adjusters are? Ask your carrier for an introduction if you haven’t met them. Skype or phone conferences quarterly can help, or better yet, on-site visits to discuss each loss, will help reduce costs.
Hone in on those claims where employees don’t get better. Work with your carrier to manage these long-term claims. Ask your adjuster to specifically outline their plan of action on the claim.
Do you have a return-to-work program? If not, you run the risk of an employment claim and increase the cost of each of your claims. Never tell an employee, “We can’t take you back until you’re 100%.”
Make your workplace a healthier one! Comorbidities like obesity, diabetes and hypertension drive medical and workers’ compensation costs. There are many vendors that can bring resources to your workplace to help manage health, including your health insurance carrier.
If I can help you improve your workers’ compensation program, call me for a no-obligation consultation today at 602.870.3230.
If you’re a new risk manager, these tips can help you transition into your new, challenging role.
Avoid these mistakes
The transition into your first risk management job can be difficult. Whether your boss promotes you into your first risk management job or hires you from another organization, you want to excel at your new position over the long haul. In part, that means avoiding mistakes, even though we often learn our best lessons when we fail. However, some mistakes can seriously hurt your risk management program, harm your reputation, or even derail your career. Here are ten mistakes you can avoid.
1. Don’t rush in with all the answers. You may arrive wanting to form your own alliances and acquire your own team, but avoid making hasty decisions. Give current employees a chance to prove themselves before you transfer them or hire your own team. The same applies to vendor relationships. You can lose a great deal of historical exposure along with loss history and coverage negotiation knowledge if you immediately decide to switch insurance brokers. “Changing brokers can be a great way to create significant coverage gaps or an errors and omissions claim for your friend the new broker,” according to one Atlanta broker. Some vendor alliances, such as relationships with contractors and body shops, may be long-standing, especially in a small town. Rushing in and making changes can cause big ripples in a little pond.
2. Don’t try to do everything at once. In my teens, I read a book called Ringolevio, about a kid named Emmett Groan growing up in the streets of New York City. One of his compatriots frequently warned Emmett when he was about to rush headlong into a decision, “Take it easy, greasy, you’ve got a long way to slide.” I found that advice very applicable in risk management. If you inherit a big job, you will be faced with hundreds of decisions, some big, some small. Take your time. While you may feel overwhelmed at first, chip away at the organization’s most pressing problems. Put out fires as they arise. Then schedule time for you and your advisers — your brokers, your attorneys, your actuaries, and your managers – to develop sound strategies and solid strategic plans.
3. Don’t use a shotgun, use a rifle. If the organization is experiencing too many injuries, for example, don’t jump to an obvious solution like deciding more personal protective equipment will answer the company’s biggest safety issues. Talk with front-line supervisors, study historical loss data, and consider several options before you throw money at a problem. Once in the door, interview employees, talk with other managers, meet with your vendors, and set a few important priorities for your first six months in the job. Using a rifle approach means you’ll have to say “No” to some people. This can cause problems. When possible, explain why you’re declining to act on the problems or the specific issues others may present to you. The more transparently you operate, the less criticism you will face. Openness reduces speculation and helps avoid resentment.
4. Don’t job hop. Most people can be very ambitious early in their careers. Yet too much ambition can hurt your career. Think long and hard before changing jobs. Bad bosses rarely outlast their employees. Deciding to change jobs because of a conflict with a supervisor is often short-sighted. The grass might seem greener on the other side, but sometimes that’s because of a septic tank (to paraphrase a famous comedian). These questions may help you avoid rash decisions.
Am I making the change solely to earn more money or for a more prestigious title? If so, will this change “pay for” what I will lose?
Am I making the change because I’m feeling unchallenged or bored? If so, what steps can I take to make my current job more challenging? For example, would becoming more active in a trade association, offering your expertise to a local non-profit, or mentoring an up-and-coming risk management professional add challenge and interest?
How will this impact my retirement financially? Will I be changing retirement systems or will I lose significant bonuses or vacation due to the change? Always factor those figures into the salary decision. This question becomes more important as you edge closer to retirement age.
How will this change impact my family and my coworkers? Our coworkers can turn even a challenging job into an appealing one. Do you really want to leave your coworkers? As for family, what ages are your children? Disrupting school-aged children can be very problematic and have negative, long-term consequences.
What are the odds I will regret this decision? Go ahead, we’re numbers people. Put a percentage to your decision then ask yourself if you’re really ready to take that gamble.
It takes months to settle into a new job. It’s often a year or more before we feel comfortable. Some studies show that many people who change jobs would have done much better if they had stayed put longer. Change for the sake of change frequently is not positive.
5. Don’t entertain gossip about your predecessors. Some at your new organization may try to build an alliance with you at the expense of your predecessor. Short-circuit these conversations whenever possible. Tactfully turn the conversation to another subject or excuse yourself from the conversation. Try not to make an enemy of the person who is trying to get into your good graces.
6. Don’t revisit your predecessor’s decisions. Especially when working with unions, you may find people lined up at your door asking you to revisit your predecessor’s judgments. Unless your predecessor’s conclusions negatively impact your overall program, don’t rush into undoing the decisions and the work he or she completed. You may not be operating under the same set of facts or with the same long-term vision that former risk manager had at his or her disposal.
7. Don’t believe your own PR. Never pretend you know more than you know and don’t start believing your own “press.” While others may soon invite you to participate on panels and present at conferences, remain humble and teachable. It’s terribly painful to learn humility through humiliation.
8. Don’t fail to communicate. A lack of communication is one of the most damaging mistakes a risk manager can make. A risk manager must have the ear of employees across the organization, from line supervisors to senior management. According to Don Donaldson, President of LA Group, a Texas-based risk management consulting group, “A risk manager needs to be an excellent communicator and facilitate his or her message across the entire organization. In my mind, that requires getting out of the office and pressing the flesh; seeing and being seen and listening, really listening, to determine what is going on in the organization.” Management by walking around is one strong tool in a new risk manager’s tool bag. Once people see that you’re willing to leave your office to discover what is happening, whether it’s on the shop floor or on the sewer line, they’ll more readily accept your expertise and counsel.
9. Don’t get discouraged. “New risk managers may make the mistake of thinking that risk management is as important to others in the organization as it is to them,” according to Harriette J. Leibovitz, a senior insurance business analyst with Yodil, Inc. “It takes time, and more time for some than others, to figure out that you’re more than an irritation to the folks who believe they drive all the revenue.” Over time, you will prove your value to the organization many times over. Until that day, quietly do your job and find encouragement from your risk management peers.
10. Don’t forget to laugh. You will be privy to the peculiarities of human nature both at its finest and at its worst, so don’t forget to find the lighter side of situations when you can. A robust sense of humor will help you through the rough spots and build bonds with your coworkers.
While these are just a few tips to help you in your new role as a risk manager, your peers probably can offer many more ways to ensure success. Over my career in risk management, I have found my fellow risk management professionals to be some of the most generous people in my life, always willing to share their expertise and provide me with a helping hand. Develop and lean on your network.
If this is your first job as a risk manager, you’re in for a wonderful experience. Take time along the way to enjoy the experiences, appreciate the great people you will meet and appreciate the lighter side of risk management.
With 2014 rapidly approaching, contact your broker or consultant now to discuss steps you can take to reduce your 2014 commercial premiums.
What can you expect for property and casualty insurance pricing in 2014? Expect some increases, but watch for significant decreases in at least one line of insurance. According to Willis’s recently published Marketplace Realities 2014, new capacity is flooding the market from “as widespread as China and Omaha.” New capital supply offers a more “inviting marketplace,” Willis executives believe. Others insurance experts across the U.S. agree. Here is what to expect in 2014.
Primary and Excess Casualty
Do not expect huge decreases in casualty prices even with “abundant” capacity and “new market entrances,” according to Willis and other experts. With the loss of the federal terrorism backstop looming in December 2014, carriers hesitate to write exposures with large risk concentrations. Underwriters are also avoiding manuscript endorsements, relying more heavily on Insurance Services Office (ISO) language. Standard ISO language has more court decisions behind it, which equates to more predictable loss experience for underwriters to base their rates, many believe. Willis predicts casualty pricing to increase two to 10 percent in 2014.
Auto and Fleet
Auto liability continues to challenge fleet owners nationwide. Experts predict auto liability pricing increases between two to 10 percent. Underwriters are imposing higher retentions on risks with large fleets, heavy trucks or poor loss experience. Carriers like ACE offer auto liability buffer limits, coverage outside the working layer when primary limits do not meet umbrella attachment points. You can help with fleet insurance by installing GPS tracking software from companies like Lytx onto your fleet, so you know where they are at all times if ever needed for evidence in future cases.
Workers’ Compensation
There are several emerging issues in workers’ compensation. With the Affordable Care Act expected to bring new insureds into the healthcare system, expect strains on the work comp system. This will put pricing pressure on workers’ compensation premiums. While experts predict that earlier treatment for comorbidities will benefit workers’ compensation experience, we predict this will be a long-term benefit. In the near term, Willis predicts work comp rates will increase from 2.5 to 10 percent. The exception is California, where employer can expect rate increases of up to 20 percent.
Employment Practices Liability (EPL)
Adverse claims experience is placing upward pressure on EPL coverage. Entities domiciled in certain California counties may find themselves unable to obtain coverage, Willis predicts. While overall capacity remains “abundant,” there are no new EPL carriers entering the market. Pricing overall will be flat to a 10 percent increase, with private, nonprofit and smaller employees predicted to face up to 15 percent increases. The Equal Employment Opportunity Commission continues its aggressive enforcement plan despite some staggering trial losses for the EEOC in 2013. There is no time like the present to explore ways to decrease your EPL risks and avoid EEOC scrutiny.
Cyberrisk
When Cyberrisk gets its own page in a white paper discussing rates, you know it is a hot topic among insurers and risk managers. There were more than eight hacking incident per day in the US in 2012 according to the report. With increased security concerns, coverage is now a “must have” for many organizations. Calling the market for stand-alone Cyberrisk “active,” Willis predicts rates will remain competitive. If your firm has had losses, however, Willis predicts slight changes – between -two to five percent overall. There are many new Cyberrisk buyers in the marketplace and pricing for first-time buyers remains competitive. If you outsource your data to cloud vendors, underwriters will review your existing contracts. Your indemnification language will be a critical factor in underwriting your risk.
Directors & Officers (D&O)
Price increases are moderating with pricing expected to be flat to a high of 20 percent for financial services firms. Homeowner and condominium associations as well as educational institutions should expect premium increases. One carrier has indicated a willingness to provide “mega limits” for Side A coverage, which protects executives against claims not indemnified by the corporation. The non-traditional money that is now flooding the insurance industry may lead to downward pressure on D&O pricing in 2014, Willis contends.
Property
We saved the best news for last. With loss ratios hovering between 75 and 85 percent for many property insurers, Willis and other insurance experts predict a big decrease in property insurance pricing. In non-catastrophe exposed risks, expect a 10 to 12.5 percent decrease in pricing. For cat-exposed property, Willis predicts smaller decreases of between five to 10 percent. Any port in a storm, right?
With 2014 rapidly approaching, contact your broker or consultant now to discuss steps you can take to reduce your 2014 commercial premiums.
Nancy Germond hosts the 144th Cavalcade of Risk, and it’s no turkey!
Since this is the closest the Cavalcade of Risk will come to Thanksgiving this year, what better topic than “turkey” risk problems? While not all blog entries conform to this juicy topic, here are a few that do. In that tone, let’s begin with my Allbusiness blog post, “Consider the Total Cost of Jerks to Your Organization.” In it I discuss how much one human turkey in the workplace can actually cost your organization.
In “The Truth is Stranger than Fiction” category, Jon Coppelman of Workers’ Comp Insider, presents “Turkey Shoot.” This post discusses a case of an insurance investigator shot by the claimant he was investigating, allegedly after being mistaken for a turkey. The truth is often stranger than fiction, isn’t it?
Next, we move to another big turkey that is making the excess market sit up and notice just a bit on the topic of climate change. Have you ever asked yourself if Mother Nature could disrupt your business? This is an old tale for many companies who make their homes in states that regularly experience extreme weather—but what about the rest of us? Read “GRC Preparedness in a Changing Climate” on the Risk Management Monitor written by Alex Bender here.
We move on to some of the biggest turkeys of them all: mortgage makers. At Insurance Bad Faith Claims Bad Faith Law Blog, Dennis Wall updates “Good Faith: Homeowners Betrayed, Banks Unreal: California Investigates, Refuses Pre-Immunity.” His posting presents a reality-based review of why there should be a settlement in the talks between State Attorneys General and financial institutions which are, at one and the same time, Mortgage Loan servicers and originators. This settlement would include all claims based on anything other than the original conditions of the talks. What reasons do the Attorneys General have for even considering a Release of All Claims including claims not yet made and that they have not yet investigated? Read more to learn how Dennis Wall really feels.
As the Supreme Court announces its intent to ponder the national health care debate and those fortunate enough to have group health ponder high-deductible savings accounts and what that means to their budget, Louise Norris presents an interesting look at opting out of group health for individual coverage. Be sure to read her entry, “More Flexibility With An Individual Health Insurance Plan,” posted at Colorado Health Insurance Insider.
In our next post on Disease Management Care, Dr. Jaan Sidorov examines Medicare’s efforts at reducing costly readmissions. It turns out that it’s not only difficult to identify those patients who are likely to be readmitted, but the math necessary to compare readmission rates across hospitals is in its infancy. Dr. Sidorov argues in “Medicare Hospital Re-Admissions: Bad,” that while Medicare’s program is well meaning, this is another example of policy running out ahead of reality.
Medicare will start paying hospitals more which receive high marks for patient satisfaction. What steps are hospitals taking to avert the risk that they receive low scores? The Healthcare Economist weighs in with “Medicare to Hospitals: The Patient is Always Right.”
And as long as we’re talking about healthcare, Hank Stern asks the timely question: “Have you considered the risk of disability and how it might affect your ability to earn a living?” InsureBlog has some thoughts on how to manage that risk. As someone who became quite ill without disability coverage, I can tell you this is a question we should all consider. Read “Are You Protected” and take heed.
That is all the entries we have this time. Have a safe and secure Thanksgiving.
