Business owners can manage their Worker’s Compensation costs
The world of Worker’s Compensation insurance buying has taken a 180-degree turn. Underwriters are being much more selective of businesses they will insure. Unprofitable clients are being non-renewed, and the number of businesses in the WC pool has increased.
Since the events of 9/11, business owners have seen significant increases in general liability and property insurance premiums. The pains of the insurance industry overall also impacted the cost of life, auto and homeowners insurance.
And of course, we have all seen the many horror stories about health insurance. Now, the pain of Worker’s Compensation is upon us.
Interesting enough, this is the one line of insurance that business owners have the most control over, but most do not know it.
The involvement of business owners, CEOs and CFOs in the WC insurance buying process is more important now than it has been in the last 15 years.
The question frequently asked, "What am I supposed to do? I hate buying WC. The state, doctors, lawyers and insurance adjusters are out to get me."
Nothing could be further from the truth.
Questions that owners, CEOs and CFOs need to ask include "Are we as good as we can be? How do we know if we are? Do we need to change?"
Change is not easy. Change is uncomfortable. The right change can be healthy and may mean the survival of a business.
Business leaders have to know if their company is managing WC costs as well as they can. The best indicator is your experience modification factor. If your experience mod is 1.00 or higher, you are "average," compared with your peers, at best.
How would you feel if your child came home from school with a report card full of C’s? That is what a mod of 1.00 represents.
The experience modification factor is a measurement calculated by the Wisconsin Work Comp Rating Bureau. It compares each business to the average loss experience of similar businesses in Wisconsin. The base line (average) is 1.00. A mod over 1.00 indicates losses are higher than average.
Every business also has a "lowest possible" mod if it had no losses in the three years used to calculate the factor.
Once owners decide change is needed, then the decision must be made as to what to change. Changing insurance carriers for the sake of change is not the solution.
Some of the questions that need to be asked are:
All of the above items are 100% within your control and impact your bottom line profit. All of these items have a huge impact on your ultimate insurance costs.
You have a choice to make. Do you want to be a victim or do you want to control your destiny? If business owners and strategic decision-makers think others will look out for their best interest, they will not remain competitive in the long run.
Why is this important? Why should business owners, CEOs and CFOs be involved? WC insurance in Wisconsin is no longer the moneymaker for carriers.
Many carriers are eager to write the auto, general liability and property insurance, but are not offering to quote WC. It has become a seller’s market, with carriers picking and choosing carefully. Do you want your business to be viewed favorably?
If so, you must work at it, not just in it.
Implement the processes that will change your "no" answers to the above questions to confident "yes" answers, and then sell your business to your insurance carrier.
Your involvement as the owner, CEO or CFO demonstrates a commitment that will make an underwriter comfortable. That comfort leads to you having choices. The lack of the underwriter comfort leads to you being the victim. The choice is yours to make.
Frank Wegner is an account executive and claim consultant at R&R Insurance Services, Waukesha
Sept. 19, 2003 Small Business Times, Milwaukee
