Here's how to keep a lid on worker's comp costs

Many companies attempting to navigate the choppy waters of workplace ir@ury costs fail to see what a certain luxury liner also overlooked: total accident costs in the workplace are similar to an iceberg. The part of the iceberg that is visible is like the direct accident costs of a claim, while the

Mary Murray, president of Work Smart, a company specializing in workers' compensation loss cost analysis, says that there is an almost universal need for knowledge among employers when it comes to the true costs of injuries that become workers comp claims. "Employers often try to downplay the costs of accidents by saying that they are covered by insurance," says Murray, "Their attitude is often, 'My claims don't cost me anything. Isn't that why I have workers comp?"'

The widespread belief that insurance covers the full cost of an ir@ury claim can be an expensive misconception, keeping from sight exorbitant injury costs that can drain profits. According to insurance loss control experts, the indirect costs of ir@uries (costs that are usually NOT covered by insurance) range anywhere from two to 17 times the face value of the claim. Obvious injury claim costs include medical, hospital, rehabilitation expenses and higher insurance premiums. Less obvious costs that are usually uninsured include:

* Time lost from work by the injured employee

* Damage to company morale

* Cost of breaking in new employees

* Loss of production

* Possible damage to equipment

But despite this, there are steps employers can take to reduce the costs of injury claims. Better workplace safety procedures, better knowledge about workers compensation insurance, and good communication between management, staff, and insurance carriers are ways employers can get control of claims costs.

Larry Rauch, president of Las Angeles Cold Storage Company and chair of the Insurance Committee of the URW, employs 80 people and has made workplace safety a primary concern. "You need to have proactive safety programs in place that not only tell but show employees how to be safe. We give our employees incentives to work safely."

Rauch has created a workplace safety bingo program that has been very successful in increasing safety awareness. Rauch runs two games split between his employees.

Each game starts with a "pot" of $25 that grows by $1 a day; every 20 days without an injury advances teams in the game. "The pot continues to grow," says Rauch. "If you go long enough without any injuries, this can add up to a good amount of money. As the pot grows, it provides further encouragement to keep working safely."

Rauch has also put together an employee safety committee that monitors the game and provides ongoing oversight of the company safety program. "We keep the safety issue in front of our employees all the time. People win prizes when they avoid injuries. If we have a good year, we have safety events like picnics to celebrate a good safety year. And we give out safety bonus bingo cards to model employees to give them even more incentives. It is this deliberate awareness that sensitizes our employees to work safely."

"A full consideration of the costs of work-related injuries on employers insurance premiums can be shocking," says Murray. "Employers have to treat inuries to their employees very seriously."

One of the first things Murray addresses when working with experience rated clients is the impact of claims, especially frequent, small claims, that affect the insurance rating and premiums of the company.

She offers an example of a $2000 comp claim. Sure the insurance company pays that claim on behalf of the employer, but that amount is factored into the experience rating of the employer and affects premiums for three years. So that $2000 claim can actually end up costing the employer $6000.

Murray, who recently tracked losses in the trucking industry, presented her findings in a language that was easily understood: to cover the bottom line total costs (indirect and direct) of a dozen $500 comp losses, a trucker would have to drive almost 450,000 miles or 17 times around the earth.

"Unfortunately, we have a very complex system that isn't really designed for lay people to understand. A business owner has got to take an active approach in finding out if there are ways to lower premium costs by tracking losses and working with their insurance agents.

Murray suggests that employers urge their agents to help them control premium increases. "Employers should ask insurance agents with help in tracking losses and identifying trends about where and why injuries are happening."

Michael Henningsen, Jr., president of Henningsen Cold Storage in Hillsborough, Ore., credits tracking injury claims with helping him create a safer workplace while reducing costs. "We are required by law to keep an OSHA log on all injuries; this forces us to track injuries at all of our locations," says Henninsgen, "We monitor types of injuries that are occurring and send information to our home office for review. We look for any injury trends that may be occurring in our warehouses. If we identify training or maintenance issues to be the cause, we address that."

Furthermore, Henningsen works with his insurance carrier. "We speak with our carrier when we put together safety programs. From free safety literature to consultants, there is a lot of information out there if you ask for it. When an injury claim occurs, we consult our carrier. Our goal is not only to identify and remedy the cause of the injury, but to do whatever we can to get the employee back to work as soon as possible. That's good for both the employee and our insurance rating.

"From the president down to office staff and the custodians, we have a zero tolerance for accidents and foster that attitude throughout the company. We involve everybody. We make sure managers and dock supervisors are well trained. Our entire employee base is always looking for potential injury exposure and then working to eliminate that exposure before something happens."

Eliminating unnecessary claims costs can be surprisingly easy if employers have the cooperation of all people involved, including employers, employees, and insurance carriers. Communicating that employers care about employee safety is key to create an atmosphere where employees are inclined to be part of the solution in reducing workplace injuries and excessive claims.

"The last thing you want is employees sitting at home, watching TV commercials with workers' comp attorneys telling them to dial 1-800-WE-CARE," says Murray. "If it gets to that stage, you can bet that your claims are going to skyrocket."

When developing a claims reduction strategy, one of the most important aspects is getting a handle on a workplace and its history of claims---to identify the source of problems with the help of an insurance agent or in-house. Murray's company, Work Smart, has developed a software package that assists companies in gathering and analyzing the nature of their workers' compensation claims.