$201,000 Back in the Owner's Pocket

Company

This fiber-optic cable company employs 35 people and has revenues estimated at $4 million.

Situation

The employer witnessed a substantial increase in the company’s Experience Mod and paid annual premiums in excess of $250,000.

Assessment

Certified WorkComp Advisors (CWCAs) did an extensive evaluation to determine what was driving up the Experience Mod, including examining past incident reports and loss-run reports, conducting their Risk Management and HR Assessment, talking with employees and supervisors and visiting various job sites. While they found a company that was OSHA compliant and had a formal safety program, they also found an above average frequency of injuries, and more recently, a surge in costly injuries.

They also identified several large open claims, causing the Experience Mod to go as high as 2.042. Three of those large claims occurred on the same day at the same location. Following discussions with the company and the adjuster, it was determined that all were related to a specific incident, but were not properly recorded with the state-rating bureau as a single event or “catastrophe.”  As a result, each claim was separately impacting the company’s experience modifier rather than being capped as one “catastrophe,” resulting in a significantly higher, incorrect modifier.  All of these issues contributed to an unnecessarily high premium.

Solution

CWCA’s worked closely with the insurance carrier to tie the three open claims together by reclassifying the smaller claim as a Cat-Loss. Once done, the Experience Mod was recalculated and a process was put in place to monitor all claims.  They also implemented a behavior based safety program, coupled with a robust accident investigation and an aggressive return-to-work program.

Result

By correcting the experience modifier, the CWCAs obtained a return of $68,000 on the prior policy year, and an additional $27,000 return from the policy two years prior. More importantly, the behavior-based safety, accident investigation and aggressive return-to-work programs led to a drop in the number of incidents per year from an average of 8-10 per year to one. With this significant change, the CWCAs negotiated a lower Workers’ Compensation renewal annual premium, reducing the company’s premium from $253,000 to $147,000.  All told, this put $201,000 back in the owner’s pocket.