Increasing employee safety can decrease insurance costs.

No one needs to tell you that construction companies traditionally face high insurance and surety rates. Yet this is a bad news/good news story: The bad news is that this trend is unlikely to change any time soon. Fees will continue to be high for liability, workers' compensation and motor vehicle

We've compiled a "top five" list of ways to lower premiums on commercial liability policies. First, use an insurance agent who is familiar with the construction industry. Second, comparison shop: get quotes from different companies and compare them. Third, find out if any discounts are available. Fourth, find out if you qualify for a contractors' credit.

The fifth item on our list is the most important step you can take to lower your insurance premiums: proactively write and implement safety and quality control programs.

Taking steps to avoid workplace injuries before they ever happen can lower your premiums by up to 20%. This cost difference reflects the fact that the number of claims filed and the dollar amount of those claims is the basis for the insurer's calculation of your cost. Insurance is, after all, a guessing game of the statistical probability of the occurrence of claims that have to be paid.

Lowering costs this way requires management's strong commitment to the process. Most projects take several years to complete, and the safety and quality control programs that are implemented at the beginning must remain in place until the building or buildings pass their final inspection.

The time to determine what safety and control procedures will be put in place should occur immediately after the contract is signed. The program should be comprehensive, covering all safety and quality control issues, from requiring the use of hard hats in the construction area to frequent tests on the composition of the concrete being poured.

Enforcement procedures should also be included as part of the overall planning. Depending on the size and structure of your company, you may opt to form a committee to draft the program and oversee its implementation, or you may assign individual workers to oversee specific tasks.

Every project is unique in some way, and that must be considered as you create your safety and quality control programs. For example, the current trend toward green construction could be one of the distinctive features that must be considered. This relatively innovative area frequently uses different types of structural materials, and it is likely to create new areas of construction defects that need to be addressed.

Something that will impress insurers and bonding companies alike is scheduling preconstruction meetings dedicated to matters of safety and quality control. These meetings can be company-wide or they can be held according to trade group. Hiring an on-site consultant to certify that all code requirements are met as the project proceeds is another tactic that can lower premiums.

The importance of these types of controls cannot be overemphasized. The recent construction crane disaster in New York City in which seven people were killed is a classic, if horrifying, example of how critical safety and quality controls can be. And the insurance and surety industries have noticed. Some have even instituted in-house risk management programs to educate construction company owners and managers about industry best practices.

As the construction industry faces the stresses of the present economic downturn, minimizing costs becomes more important than ever. Controlling the frequency and severity of losses is the best way to lower insurance costs, and proactive, preemptive actions are the best way to achieve that goal. The bottom line will show the benefit of instituting strong safety and quality control programs.

By MARC NEWMAN, CPA

ANCHIN, BLOCK & ANCHIN LLP