Congratulations on ensuring you have workers compensation coverage. Now, you need to be diligent not to make one of the common mistakes. It could ultimately cost you higher premiums and missed benefits. And while you don’t have a choice about mandated workers compensation, you do have some control on how much it costs. A quick audit could save money in the future.
- Payroll mistakes—underestimating and overestimating. Workers compensation premiums are directly related to estimated payroll. If you underestimate payroll, and a review of your business occurs, you could owe additional premiums due in one full payment. If you overestimate, you are basically overpaying for your coverage. You might recoup those dollars in the event of an audit, but you have lost the interest and ability to use those funds elsewhere in the meantime.
- Changing business classifications—using the wrong category. Businesses are classified into one of 700 plus codes which best matches the type of work being performed and ultimately the cost of your premiums. If, for example, you change from carpentry to remodelling, you will more than likely see an increase in premiums. So, if you aren’t doing remodels and only carpentry, it is in your best interest to find the accurate code and save money.
- Subcontractors—make sure they are insured. If you use subcontractors for your business, you could be subject to pay for their workers compensation fees while on the job if they aren’t covered themselves. Audit findings are detailed, so it is best to have an in-house subcontractor management program. This ensures you have current certificates of insurance for each subcontractor that you use. Be sure this isn’t just liability coverage, but also workers compensation.
- Claims—they need to be managed too. Each and every claim dollar paid will ultimately affect your workers compensation cost. The system is comprised of a complicated set of governed statutes and most employers do not have the expertise or funds to manage those claims with any sense of quality. Insurance premiums are calculated on a variety of filters, but one of them is comparison to businesses similar to yours. The better the claim experience, the lower the cost. Poor claims management will result in increased insurance costs. Make sure you stay on top of your claims:
- Report to your insurance as soon as possible
- Pay attention to open claims
- Work toward the goal of closing claims sooner than later
- Stay in touch with your claim’s adjuster
- Agents—they aren’t all equal. Much like you don’t take your car in for repair to a lawyer and ask a car repairman to craft your will, you don’t want to use the first person you find that claims to be an insurance agent. There is a wide variety of experience in the industry and selecting the proper agent for your needs is important. Be sure to focus on knowledge base and practical practice and understanding of the process. This is the person who will be the liaison between your business and insurance company. They need to be able to assist you in finding the right insurance company and providing claim service when you need them. A few things to look for include:
- An independent agent will have more options than a direct agent to one company.
- Is your agent only interested in selling you insurance and not assisting with the complicated paperwork needed?
- Does your agent have knowledge of the rules and regulations set forth by regulatory bodies?
- Safety—always have a plan. It is not enough to just have coverage. You need to mitigate the need for that coverage in the first place. While it might seem like too much trouble to design or too costly to maintain, the fact is, the opposite is true.
A safety plan can improve the bottom line cost of doing business by lowering injury rates and lessens the amount of time needed to find replacement workers. Ultimately, it can reduce your premiums with credits from either the state or the insurance company.
- Cost control—don’t lose sight of it. Adopting some form of cost control to your workers compensation program will help to keep expenses down. Be sure to include all major areas into the program guide: premium reviews, safety planning and training, claims management and internal auditing of all. It doesn’t have to be complicated, but it should be comprehensive.
- Returning to work—what is the plan. There will come a time when the injured employee is ready to return to work, perhaps in a light or modified position. Without a return to work program guided by medical rehab, authorization and accommodation, you run the risk of having that employee out for longer. That can equate to lost productivity and increased costs.
- The importance of workers compensation coverage. It is important not to treat this coverage as a routine commodity that you would secure as you go through a checklist of things to do. It isn’t as simple as a list of office supplies to buy or a one-time purchase and repetitive payments with no review. As an employer, you will want to get the best possible policy and coverage for your needs at the best possible price. That will take time and effort to find and to keep. Cheapest is usually not always the best and one size does not fit all.
- Audits and calculations and mistakes, oh my! Employers lose thousands of premium dollars each year due to mistakes and errors. Many of those mistakes show up in audits and calculations. And most of them are unknown to employers. Don’t just believe the results of those audits, review them yourself. Validate the job classifications, rate verifications, the credit and the claims made. Use an independent company, if needed, (outside of your insurance agent and your auditor) who specialise in these types of services. The accuracy of audits and calculations can save you in the long run.
Complying with workman’s compensation coverage is required by law. But managing it to your best interest is up to you. Don’t fall for common pitfalls. Be diligent, thoughtful and proactive. For more information on how to get workers compensation or to avoid making a mistake, be sure to reach out to us for help.