The Top 5 Ways To Reduce Your Workers' Comp Premium
For a business owner, workers’ comp insurance is an inevitable necessity. But by learning how the system works, you will be able to comfortably have a handle on what you are paying for, what affects your annual premium, and how to better manage and plan for unforeseen events.
Here are five proven ways to help you reduce your workers’ compensation costs:
1. ENSURE JOB CLASSIFICATIONS ARE ACCURATE
Code misclassifications can cause your workers’ comp premiums to skyrocket, so it is critical to be sure that you are using the correct codes. As many as 70% of companies overpay on their workers’ compensation insurance premiums, and the root cause is most often job code misclassifications. A proper classification helps insurers estimate expenses or losses related to the risk they are insuring. That means misclassification results in over-insuring expenses or losses.
With hundreds of classification codes it’s easy to misclassify jobs, and it’s an incredibly common mistake. Business type classification codes are assigned to companies in all industries except construction, agriculture, and staffing services, where numerous employee codes are assigned to various individual employees. As you might assume, those are the industries that tend to have the most classification errors due to the added layer of complexity.
A good example is a large staffing company we work with that has multiple exposures (sometimes as high as 10)depending on the jobs that they are filling (storage warehouse, clerical, restaurant, construction, machine shop, textile manufacturing, etc.). Other times, it isn’t how many codes they have, but are they for the right reasons? Another example is the code 5437 Carpentry, which is commonly misclassified to general contractors. This code is specifically for an artisan contractor, whose scope of work is doing specific cabinet installation and is a lower rate than most construction class codes in which the work is eminently more risky.
In industries that predominantly use business-type codes, there are also certain exemptions for individual job types (clerical, outside sales, and drivers, in some cases). To say that the classification system is complex would be an understatement, so it is best to have a workers’ comp expert review your codes with you.
2. PROVIDE PROPER CARE WHEN AN EMPLOYEE IS INJURED
Job injuries should be dealt with immediately. If you aren’t sure how to develop a process to ensure that your employees receive the proper care, talk to your insurance agent. Processes are important, and they will vary depending on the type or injury. But it is equally important that your employees know to immediately notify their employer or direct supervisor when an injury has occurred. This is a point at which it is critical to obtain the proper information for documentation while still remembering that this is an injured employee who may be in pain and is in need of compassion.
With continuing medical inflation, it is especially important to ensure the employee receives the most appropriate care for their particular injury. If emergency treatment is not necessary, a walk-in occupational health or urgent care clinic are a lower-cost alternative to the emergency room. Assessing an injury upfront can help streamline an employee’s recovery, get them back to work faster, and cut down on claim-related expenses.
3. REVIEW INFORMATION ON EMPLOYEE INJURIES
Speak to your insurance agent to make sure what has been paid on employee injuries is