Partners needed Featured

8:00pm EDT September 25, 2008

Workers’ compensation claims can be a pain for both employers and employees. Employers lose out on manpower while facing a potential financial barrier. Employees suffer from a daunting ailment that sidelines them for short or long periods of time. The issue can easily be time consuming and confusing for both parties.

Steve Jacobson, a commercial insurance broker for Westland Insurance Brokers, says one way for employers and employees to find common ground on the issue is through constant training and educational programs. It’s also important for companies to implement a formal safety program in an effort to prevent accidents before they happen.

Smart Business spoke to Jacobson for a more detailed look at how companies should approach workers’ compensation insurance.

How can companies reduce workers’ compensation premiums?

The most important way is to work with a broker and insurance company who knows and understands how your business works. Regular claims reviews should be performed to make sure claims are being adjusted in the most timely and cost effective manner possible. The sooner a company can get a claim closed, the less it will affect future costs. By preventing or reducing the exposures that cause injuries, a company can assure reduced premiums in the future. Get management and employees involved. Prevention and education are key factors in future insurance costs.

What factors should companies consider when selecting an insurance carrier?

With the recent reform, many new insurance companies have recently begun writing workers’ compensation coverage in California.

When choosing a carrier, a company needs to select one that is financially sound and has an ‘A’ rating from the AM Best Co. Choose a carrier that has its own claims personnel, preferably located where the business is located. By doing so, you will get claims adjusters who know who the good doctors are and who the bad ones are, which will help in reducing fraudulent claims and increased costs on legitimate claims.

The better quality insurance companies will also have loss-control personnel, who will assist you for free with reducing exposure to losses and with employee safety programs. They also have employees dedicated to detecting and fighting fraudulent claims.

Can an employee incentive program be beneficial?

Employee incentive programs can be extremely beneficial in reducing the frequency and severity of a company’s claims. When employees feel that they have something to gain, they will work hard toward the reward. By making employees understand they are a part of the team, they will take ownership in the program. A company’s losses today affect its premiums for the next few years. The small costs of today’s incentive programs will save a lot more for years to come.

How can employers help employees understand the impact of workers’ compensation on a business ?

Employers need to educate employees on the effect the company’s losses have on their employer’s premiums. Employees need to understand that today’s losses affect a business’s premiums for the next three to four years. When you educate the employees and explain that if the employer has to pay higher premiums due to WC losses and that there might not be enough money for raises or bonuses, it gives the employees an incentive to avoid a claim or to get back to work as soon as possible after a claim.

A successful workers’ compensation program really has four partners that need to successfully work together: the employer, the employees, the insurance broker and the insurance carrier.

Has the cost for workers’ compensation premiums changed for California employers in recent years?

Starting in 2000, the California workers’ compensation industry began to see significant rate increases. Since the new reform has gone into effect, our policyholders have seen decreases on average from 65 percent to 75 percent over the past two years from a number of high-quality, ‘A’-rated insurance companies. Rates are continuing to come down, but keep in mind that the cheapest rate is often not the best rate.

How can employers reduce their exposure to loss?

Regular safety and employee training meetings should take place with topics that are specific to your industry. Claims can often be avoided with proper training before an accident. Employers should also have the broker’s or insurance company’s loss control representatives perform a walk-through a couple of times a year to survey the business in order to point out any exposures to losses that could be eliminated before they cause a loss. Material handling procedures and machine usage should also be evaluated frequently. Additionally, by providing safety equipment to employees such as back-braces, goggles, etc., some claims can be virtually eliminated.

STEVE JACOBSON is a commerical insurance broker with Westland Insurance Brokers. Reach him at or (619) 641-3260.