How to get back in your underwriter’s good graces

Effective risk management often involves avoiding risks before they occur, but accidents will happen and frequent accidents may cause the insurance company to raise your rates. Perhaps, a project was plagued by job site accidents and cases became difficult to manage, so your workers’ compensation experience modification factor rating shifts unfavorably. Now what?

Employers must consistently make safety a priority and part of the overall culture. If they increase awareness and incorporate risk management, risk control and claims management into each department, there will be fewer employee injuries and vehicle accidents and reduced public liability. This lower cost of risk will help insurance companies see your company in a more favorable light.

Smart Business spoke with Patrick Zedreck, assistant vice president at Arthur J. Gallagher & Co., about how to control your losses and lower your costs.

How far back do underwriters look when determining rates? How long does it take to overcome a poor claim experience?

Underwriters use five years of claims history for most types of insurance. It can take three to five years to overcome a poor claim experience, but a business can argue that it has improved its accident prevention efforts and the past doesn’t predict the future.

If a company has claims that drive up rates, how can it lower those?

Any business, not just companies with poor experiences, should get into these habits.
Start by reviewing claims management and risk exposures, such as safety policies, work practices and procedures, training and management practices that promote safety. Analyze loss-run claims and accident data to identify the causes driving loss trends.

Review covered vehicles or machinery to make sure everything is still being used. If you’ve experienced turnover, update your driver list. You may be insuring a problem driver you no longer employ. Make sure your employees are classified correctly, so workers’ compensation rates are accurate.

Work with your agent on premium reduction and risk management strategies. You can take on more risk by increasing deductibles or eliminating an exposure, and implement preventive actions that eliminate or greatly reduce the possibility of a large claim happening again. You also could subcontract out the types of accidents causing exposures and eliminate them from your insurance. If you take this approach, it’s critical to have appropriate risk transfer agreements with the subcontractor (i.e. hold harmless/indemnification agreements and adequate insurance requirements).

What training are underwriters looking for? 

They typically want training to address the types of claims an organization is having. If employees are experiencing back strains, then underwriters want to implement safe lift training. If vehicular accidents are too common, require a defensive driving class.

How can a business improve its safety plan? 

Training employees in workplace safety, automobile operation, property protection and employment practices liability is just the beginning. Employers need to make supervisors responsible for safety, with their compliance to the safety plan part of their evaluation. Workplace safety committees also should be used as a vehicle for employee engagement and ownership of the risk management program. If employees don’t ‘buy in’ to what an organization is trying to implement, programs cannot succeed.

Identify additional sources of injury and unsafe work practices with your agent. A comprehensive service plan to mitigate hazards, correct unsafe behaviors and improve supervisory controls needs to remain a priority, not sit on a shelf. To make safety part of everyday life, add activities throughout the year, such as:

  • Safety and security assessments of facilities and properties.
  • Comprehensive site-specific emergency response plans that are discussed regularly.
  • Table-top training exercises with the staff and random site audits to benchmark safety and security readiness.
  • Workplace safety committees that promote employee involvement and ownership of risk management.

Any company needs to manage its risk and loss experiences, but to lower your rates, you’ll have to show that you’re taking steps to lower your risk profile.

Insights Insurance/Risk Management is brought to you by Arthur J. Gallagher & Co.