Southwest Missouri Safety Co. owner Ron Hinds, left, is consulting with David Ross, director of operations for Morelock-Ross Builders to enhance the company's safety efforts. Hinds visits Morelock-Ross sites to monitor employee safety.
State recommends 11.1% drop in workers' comp loss costs
Though many companies may be facing higher health insurance costs with the start of a new year, they may see a welcome decrease in what they pay for workers’ compensation coverage.
In December, the Missouri Department of Insurance, Financial Institutions and Professional Registration recommended an 11.1 percent reduction in workers’ compensation loss cost – a predictor of how much they will pay in claims during the year – based on statewide data for injured worker claims paid in 2010.
Every year, the National Council on Compensation Insurance files lost costs with the department for review, and insurers use the data to set their rates, according to a DIFP news release.
NCCI proposed a 4.4 loss cost reduction, based primarily on medical costs and lost wages due to on-the-job injuries, said Travis Ford, DIFP communications director. The department hired Miami-based AMI Risk Consultants to review the NCCI’s filing, and recommended an additional 6.7 percent decrease, for a total proposed loss costs drop of 11.1 percent, Ford said. This is the fifth consecutive year the NCCI and DIFP have recommended decreases.
He said insurance companies don’t automatically translate the loss cost percentage directly into an equal reduction of insurance rates by the same amount. Insurance companies do base their rates on the prediction of loss costs for the coming year, and those are the biggest factor in setting rates, Ford said, and under Missouri law, insurers must set their rates based on recommendations from NCCI or DIFP.
Though Department of Insurance Director John Huff has said following the 11.1 percent reduction recommendation could save Missouri employers as much as $80 million in 2011 workers’ compensation premiums, Randall Gammill, a workers’ compensation specialist and partner with Hollister-based Connell Insurance Inc., expects the state’s nearly 300 workers compensation insurers to use NCCI’s recommendation to set their rates.
“NCCI has done this so long and they do it in a variety of states, and for that reason, most carriers are going to do whatever the NCCI suggests because it may be a carrier that does business in 50 states,” Gammill said. “They’re not going to look at the different states for a third party’s actuary figures. They’re just going to look at what the NCCI numbers are in all 50 states they do business.”
Based on research and statistical figures and calculations done by the NCCI, carriers can compare records of loss costs for a particular business such plumbing or heating, ventilation and air conditioning, as a percentage of that sector’s payroll, he added.
The insurance companies then take that loss cost, and with the deregulation of the state’s insurance market in 1995, insurers can decide the additional amount they want to charge to cover expenses and profit or what they think the market will bear, he said.
Workers’ comp insurers may mark up the loss cost by 20 percent to 40 percent or charge the actual suggested loss cost rate calculated by the NCCI or may even charge a rate that is below the recommended loss cost, said Gammill, who worked for the state’s Division of Workers’ Compensation from 1992 to 2004.
Beyond NCCI and DIFP regulations, Gammill said workers’ compensation rates also have declined in recent years because of 2005 reforms that tightened the definition of work-related injuries and removed injuries such as those in company vehicles. Such injuries are now sometimes considered personal rather than work-related, Gammill said.
Making sure safety is a focus of companies and employees – through training such as a 10-hour Occupational Safety and Health Administration course – is the biggest factor in cutting loss costs and preventing workplace injuries, said Ron Hinds, owner of Southwest Missouri Safety Co., which conducts OSHA training and safety consulting and seminars. Hinds said the 10-hour course is required by all on-site employees contracted to work on public works construction projects, and any worker on a job site who is not carrying a card that signifies completion of the course can be fined $2,500 plus $100 a day until the worker course is completed.
Morelock-Ross Builders employees and superintendents are trained in safety, completing the requisite 10-hour course and attending monthly internal safety meetings, but Director of Operations David Ross said the company wanted to work with an external source to enhance its safety efforts.
“We thought it was important to have an outside perspective to better our safety program and to be at the forefront of issues that face our industry,” Ross said, noting that Morelock-Ross has consulted with Hinds for about a year.
Hinds visits the company’s work sites to assess safety of ongoing projects and monitor employees, and he provides training and quarterly safety overviews to update employees about safety regulations and issues.
Ross said a superintendent who is managing a three-story hotel site with a wood-framed structure will have different safety concerns than a superintendent who is overseeing an office building site with a steel-framed structure, and that’s why having an outside consultant is helpful.
“Ron is there as a second set of eyes and insures that we are in compliance with safety regulations,” Ross said. Though he declined to disclose specific figures, he said the company’s on-site injuries dropped 66 percent from 2005–09. The company has never had a fatality, he added.
Even in industries where the OSHA training isn’t required, Hinds recommends that companies tailor safety programs to address and prevent accidents and injuries, because there isn’t a one-size-fits all plan.
Focusing on safety doesn’t just protect a company’s employees, it also can improve the bottom line, since on-site accidents can cost thousands – or even millions – of dollars, Hinds said, noting that he has been able to help companies lower their workers’ compensation premiums through development of safety programs.
He recalls a time when an insurance company called him to work with one of its clients after an employee fell 28 feet from a ladder onto concrete.
The insurance company told Hinds the estimated cost of that construction accident would result in $700,000 in medical costs.
“Once you have had several accidents, your work comp carrier will probably either raise your rates extremely high or drop you completely, and once you’ve been dropped by a work comp company, it’s extremely hard to get someone else to carry you ,” Hines said.[[In-content Ad]]
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