How to Choose a Workers’ Compensation Carrier Partner

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

Many years ago, when I was a young producer, one workers’ compensation carrier legend pulled me aside and told me never to forget that a workers’ compensation decision is not a one-year decision, but at least a 4-year decision. Of course, policies are only written on a one-year basis but what he was teaching me was that the carrier you choose will handle all the claims you have through your Experience Modification cycle. So, evaluating and recommending a workers’ compensation partner for my clients just became a much more thorough analysis of many critical factors beyond just the premium.

I understand and want to acknowledge that competitive pricing is very important, yet other than price, most business owners are not sure what to look for when comparing carriers. All businesses should consider the following in their evaluation of a workers’ compensation carrier:

• What is the A.M. Best rating of the carrier?

• How long have they been in the State workers’ compensation marketplace?

• What is their premium volume within the State?

• What “in-house” services does the carrier provide? Two services for special consideration are:

  • The Claims Department

  • Loss Control Service

• How does their medical cost containment numbers compare to the industry averages?

• How does their claim closing rates compare to the industry average?

• Are the following services available?

  • Telemedicine

  • Nurse Triage

For any businesses that pay above $250,000 in annual premium, should consider these additional questions:

• Does the carrier offer a dedicated indemnity claims examiner for your business?

• Does the carrier offer Claim Review Meetings?

• Does the carrier offer a Client Services coordinator?

• Does the carrier offer on-line claim status information?

• What loss sensitive programs do they offer?

Further, for any businesses that are exploring loss sensitive programs (usually above $400,000 in annual premium) like deductible workers’ compensation, they should evaluate the following:

• What are the terms of the letter of credit required?

• Is there a Loss Conversion Factor (LCF)?

• Is a Loss Fund required?

• How are Allocated Loss Adjustment Expenses (ALAE) handled?

• Is there a policy deductible aggregate?

• Are there any claims handling charges?

• Are there Medical Cost Containment charges?

Since many of the concepts and terms above require a deeper understanding and explanation, listen to my podcast episodes where I examine this topic in greater detail.

Also, consider attending one or both of my live webinars that cover this topic and afford you the opportunity to ask questions. Register for our Thursday April 1, 2021 webinar where I will focus on businesses with annual premiums below $400,000, and/or register for my Thursday April 8, 2021, webinar where I will deal specifically with deductible workers’ compensation. Both webinars will be 30 minutes in length.

If you would prefer to speak with me directly, I can be reached at (619) 937-0170 or email me at dgarcia@ranchomesa.com. 

I wish you all a safe and profitable 2021.

Four Factors that Shape your Risk Profile

Author, Drew Garcia, Vice President, Landscape Group, Rancho Mesa Insurance Services, Inc.

How do you differentiate your company from your local competitors? Product, customer service, delivery, etc. The same can be said for your risk profile and insurance costs. Why are my insurance rates high when my competitors are low? Here are four factors that influence your risk profile and impact pricing:      

FREQUENCY OF CLAIMS

The frequency is the number of workers’ compensation claims you average.

Calculation – # of claims / basis

Evaluate – How often are you having workers’ compensation claims and how does that compare to other landscape companies in your region or state?  If frequency is high, a line can be drawn to conclude that your high frequency will lead to more lost time or severe injuries.

Action – If you are having a frequency issue, you need to assess:

• Injury Type (back, hand, wrist, knee…)

• Root Cause (lifting, punctures, slips…)

• Implement corrective actions to help mitigate the risks associated with your claims. 
  
  Take it to the next level and evaluate “near misses.”  Treat a “near miss” as if it were a claim and strategize a corrective action to prevent it from happening in the future. 

Use our Risk Management Center to assign a training to the foremen or supervisor and injured employee to help prevent this from occurring in the future.

Indemnity (Lost Time) Claims

Indemnity is the number of  lost time claims your company experiences.

Calculation – # of lost time claims / basis

Evaluate – How often are you having indemnity claims that result in lost time and how does that compare to other landscape companies in your region or State? 

Action – If you are having an Indemnity issue, you need to assess:

• Injury Type (back, hand, wrist, knee…)

• Root Cause (lifting, punctures, slips…)

• Implement corrective actions to help mitigate the risks associated with your claims. 
  
  Establish a “return-to-work” program which allows your injured employees an opportunity to come back to work on limited duty. 
  

  Improve accident investigation, documentation, and claim reporting protocols to equal best practices.

Experience Rating

Your experience rating is a combination of your loss data and total payroll when compared to your industry typically over a three year period.  Your experience rating will either credit or debit your workers’ compensation premium accordingly.

Calculation – Project your Experience Modification (XMOD) 6 months early at your Unit Stat filing.

Evaluate – Determine the impact changes in your Expected Loss Rate (ELR) and Primary Threshold will have on your next XMOD.

Action – Controlling your frequency of claims and number of indemnity claims will lower your Experience Modification. 

Operations

Heavier operations would include hardscape construction, tree trimming, and snow removal in which generally heavier machinery and product is used, thus a higher exposure to injury.  Compare these types of landscape operations to a lighter exposure such as landscape maintenance, mowing, edging and pruning. 

Calculation – Determine the percentages of your operations that fall into the various landscape work areas.

Evaluate – Identify the exposures that are unique to each area of your operations.

Action – Implement safety programs catered to your exposures that will mitigate risk and help protect your employees.  Although your operations might be heavier, you have the ability to implement tactics to reduce or prevent the claims from happening, thereby subjectively and objectively making your risk profile more appealing. 

We have seen 100% landscape construction firms achieve industry low experience XMODs and the markets most aggressive rates.   Don’t wait for the injury to occur; be proactive and stop the claim before it transpires. 

Your risk profile has already been created whether you know it or not.  The opportunity for you to own it and improve it is always available.

With one click of the mouse, you can see how you stack up against your competitors through our Key Performance Indicator (KPI) dashboard, today.

Contact me to get a customized KPI dashboard at (619) 937-0200 or drewgarcia@ranchomesa.com.

Home Care Dishonesty Bonds and Client Property Theft Coverage Are Not Created Equal

A common misconception in the home care industry is assuming a Home Care Dishonesty Bond is the same as having coverage for theft of client property. Many business owners don’t realize that Home Care Dishonesty Bonds, following the payment of a claim, will seek reimbursement from the business owner. That means the business owner is ultimately going to pay the claim if they don’t have an insurance policy to cover this type of act.

A bond is different from traditional insurance in that a bond is in place to protect the consumer (i.e. the client) in the event that a business becomes insolvent or refuses to pay a claim. In the case of home care dishonesty bonds, the bonding company acts as a safeguard for the client. In the event of a proven loss, the bonding company steps in to pay the client, and then seeks reimbursement from the business.

There are insurance companies that provide Theft of Client Property Coverage (sometimes called Third Party Coverage) under the general liability insurance form. This acts on behalf of the business owner.  Should someone accuse their employee of stealing, this insurance would pay the claim and not seek any reimbursement from the business owner.

It is worth looking into your current general liability policy to see whether or not your company is truly covered for theft of client’s property rather than be surprised when you receive an invoice from the bonding company.

If you have any questions about this topic, please contact Rancho Mesa Insurance Services at (619) 937-0164.