Like it or not, you pay for injuries. The insurance companies just finance them.

In fact, on a less severe claim, you will pay them back through an increase in premiums of 100 percent to over 250 percent! They simply cover the initial costs of the claim so its impact on your company is not all at once. The total incurred cost of the claim, total paid and total reserves, are then included in the calculation of your Experience Mod, which will increase or decrease based on the costs and type of the claims.

Let's take a look at an actual example. A Minnesota-based manufacturing company has a manual premium of $215,000 per year. And for simplicity reasons, they have three recordable claims in a policy year.

Every one of these claims is "lost time" claims and the employees were provided with indemnity payments. The impact on these specific claims is listed below:

Total Incurred Cost Impact on EMR Impact on Premium Over 3 years

$288 +.0007 $453 (+157%)

$3,642 +.0113 $7,290 (+200%)

$25,232 +.0316 $20,382 (-20%)

The point of me highlighting the fact that claims are "refinanced" through an increase of premium, is to increase your antenna so you realize even the smallest of claims need your immediate attention. So what can you do about it?

-If your company is based in an Experience Rating Adjustment (ERA) approved state, get your employees on transitional duty before the state specific time period expires.

-Increase employee awareness of the implications that injuries have on them and the ability of the company continuing to function.

-Understand the driving factors of your Experience Mod.

-Conduct a root cause analysis on all injuries, not just certain ones.

-Meet with your agent and adjuster prior to your policy valuation date to evaluate and minimize reserves on open claims.

Of course there is much more that you can do, but by simply understanding the fact that you ultimately pay for your claims will increase your awareness and hopefully lead to implementing workers' compensation and safety strategies to decrease the number of injuries, as well as the overall "hit" your bottom line takes.



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