Five Dangers Of Ignoring Workers Comp Because Rates Are Low By Kevin Ring
Why Ignoring Workers’ Comp Is a Costly Mistake—Even Now
Workers’ compensation insurance has never been cheaper. In the last 30 years, rates have plummeted by over 80% in some sectors when adjusted for inflation.
With costs falling here while rising everywhere else, it’s tempting to shift your focus away from your workers’ comp program. That is a dangerous and expensive mistake. Low rates create a false sense of security, masking risks that can quietly drive up your costs for years to come.
Here are five reasons why smart business leaders remain focused on workers’ comp, especially in a soft market.
1. Today’s Claims Will Cost You for the Next Three Years
If your business has a track record of claims, your insurance costs are calculated using an Experience Modification Factor, or “mod.” Think of your mod as a credit score for your company’s safety record. A low mod earns you a discount on your premium; a high mod results in a surcharge.
Here is the critical point: an injury that happens today doesn’t just affect this year’s policy. That single claim will negatively impact your mod—and therefore your premiums—for the next three years. Ignoring safety and claims management now guarantees you will overpay for insurance in 2025, 2026, and 2027.
2. A Weak Safety Culture Erodes Your Workforce
Your employees are your most valuable asset, and in today’s tight labor market, they are harder than ever to replace. When you relax your focus on workplace safety, two things happen:
- You risk losing good people. A lax safety culture leads to preventable injuries. This causes unnecessary pain and suffering for your employees and drives up costs that eventually find their way back to your bottom line.
- You hire greater risk. In a rush to fill positions, many businesses loosen their hiring standards. This often means bringing on workers who are not physically suited for the job, dramatically increasing the likelihood of an on-the-job injury.
A strong safety program is not an expense; it is an investment in the health, productivity, and stability of your team.
3. An Injured Employee Off Work May Never Return
When an employee gets hurt, the single most important goal is to get them back to work in a productive capacity as soon as it is medically safe. This is not just about compassion; it is about protecting your business.
Research shows that if an employee is out of work for 12 weeks, there is only a 50% chance they will ever return to their job. That probability drops with each passing week.
Can you afford to permanently lose your best employee? What would it cost to recruit, hire, and train their replacement?
An effective Return-to-Work program is non-negotiable. It requires two simple things:
* A pre-defined list of light-duty tasks an injured employee can perform.
* A relationship with an occupational physician who understands your goal is to keep employees engaged and productive during their recovery.
Employees who participate in a Return-to-Work program recover faster, and you retain a valuable member of your team.
4. The System Is Filled with Errors That Cost You Money
The workers’ compensation system is complex and riddled with errors. From payroll audits to claims management, mistakes are common—and the business owner almost always pays for them.
- Over 75% of premium audits contain errors, often because employers don’t know the proper way to classify payroll.
- Claims reserves are frequently set too high by overworked adjusters, which artificially inflates your mod.
When you don’t pay attention to your workers’ comp program, you are essentially guaranteeing that you will pay for someone else’s mistake. These errors directly increase your premiums.
5. You Are Likely Overpaying for Insurance Right Now
Even with historically low rates, there is a very high probability you are paying more for your workers’ compensation insurance than you need to.
The combination of system errors, inflated claims, and an incorrect mod means your capital is trapped inside your insurance program. That is money that could be invested in new equipment, marketing, or hiring—the things that actually grow your business. Active management of your workers’ comp program unlocks that capital.
Rates will not stay this low forever. Market forces will eventually push them higher. Businesses that build a strong foundation of safety and active claims management now will be protected from future rate hikes. Those who are complacent will see their profitability suffer.
Do not let the current market fool you. Taking control of your workers’ compensation program is one of the most direct ways to improve your company’s bottom line.