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.

The Benefits and Risks of Third Party Indemnity

Author, Andy Roberts, Account Executive, Surety Division, Rancho Mesa Insurance Services, Inc.

For a contractor that is wanting to bid a job, or has won a job that requires a bond they are not able to qualify for on their own, one option to increase their bond capacity and ability to qualify would be to have a third party indemnify to their surety. While there are definite risks, this type of agreement can be very beneficial to both parties.   

For the contractor, the main benefit is the additional financial backing provided by the third party that will help alleviate concerns of a surety that might lead to the contractor running out of money, therefore, not being able to complete the job as contracted. For the third party, they can negotiate what their compensation will be through the contractor, since they are taking on a financial risk by signing the indemnity agreement. This type of agreement should not be entered into lightly because there are risks for both the contractor and the third party.

A Surety Bond Indemnity Agreement is a signed agreement which states the principal will indemnify the surety company, should a claim occur. When a third party also signs this agreement, they are opening themselves up to the risk of having to indemnify the surety should the contractor that is doing the work fail to complete it, forcing the surety to step in to complete the job. This becomes even more likely if the contractor becomes insolvent, making the third party next in line for indemnity purposes. While there is risk associated with this type of agreement, there are ways to mitigate that risk and that is for both the contractor and the prospective third party to thoroughly review each other’s businesses.   

When a third party is providing indemnity to support another businesses project, it is vitally important that they have a firm grasp of that company’s current capacity, capital and character, and this is the same for the contractor. The contractor needs to know that if they do get into trouble on the job, the third party does in fact have the ability to help them out of the situation.

For any questions regarding third party indemnity, please contact Rancho Mesa Insurance Services at (619) 937-0164.

Six Reasons for Promptly Reporting a Workers’ Compensation Claim

Author, Jeremy Hoolihan, Account Executive, Rancho Mesa Insurance Services, Inc.

Reporting workers’ compensation claims in a timely manner can have a huge impact on the severity of the claim. Some policyholders believe the practice of not reporting employee injuries early is a good business practice. This could not be further from the truth. Below are six reasons why reporting claims early can reduce the overall impact of a claim on an employer’s insurance premiums:

1. Lowers the cost of a claim – The cost of a claim gets higher and higher for each day it is not reported. Claims reported after 30 days of the injury on average cost 30% more than those reported right away.

2. Ensures that key evidence is secured – The prompt reporting of a claim allows the claims adjuster to ensure key evidence is preserved. It also ensures that the supervisor’s accident report and witness statements are taken while things are still fresh in their minds.

3. Potential hazards are identified as early as possible – When an injury or near miss occurs, there should be an accident investigation completed to find out the root cause of the injury. Identifying the cause or potential hazard will reduce the likelihood of a similar claim from occurring in the future. It can also be useful as a training topic during safety-related meetings.

4. Could identify “red flags” for fraud – It is very important to understand that an insurance company only has 90 days from the employer’s (or their management or supervisors) date of knowledge to accept or deny a claim. If the claim is reported late, it leaves the adjuster little time to investigate the validity of a claim, which might force them to accept it. If the claim is reported 90 or more days after the date of knowledge, the adjuster has no choice but to accept the claim. The impact of a fraudulent claim can have a significant effect on future workers’ compensation pricing.

5. Reduces litigation – When an injury claim is not reported in a timely manner by the employer, it can make the injured employee feel neglected or disgruntled. Reporting the claim early, showing compassion towards the employee, and keeping the lines of communication open will significantly reduce the likelihood of a litigated claim. Employees need to feel they are going to be taken care of medically and still have a job at the company. Employees are more likely to hire an attorney when they feel uneasy about their job security or they are not receiving proper treatment. When a claim becomes litigated, it typically prolongs the time it takes to close the claim and increases the cost by an average of 30%.

6. Untreated medical only injuries could develop into indemnity claims – A small percentage of medical only claims can turn into indemnity claims as a result of unforeseen complications. For example, if an employee has a small metal shard stuck in their finger and chooses not to receive treatment, the finger could become infected, require surgery, and ultimately cause nerve damage. Had this injury been properly treated from the beginning, it likely would have simply been a first aid claim. Early treatment is key to minimizing indemnity claims.

Quickly reporting claims is simply one risk management strategy to controlling a business’s insurance costs. To discuss this strategy and others please feel free to contact Rancho Mesa Insurance at 619-937-0174.