Moore: Ignore Comp Now, Pay More Later

Friday, December 10, 2021 | 0

Many articles have appeared on this website after watching a process repeated multiple times. An employer ignoring workers' compensation insurance will soon pay more premiums to its carrier. A self-insured employer will end up allocating more of its budget to workers' comp payments.

James Moore

Agents and risk managers ignoring their clients’ comp insurance almost always results in having to explain a sharp increase in premiums. Let us look at why workers' comp remains “back burner” insurance.

Commercials are ignoring
workers' compensation

One can look to commercials on TV and radio over the last 10 years to see that workers' comp is an ignored line of insurance until the premium audit bill arrives in the mail or an email.

I am not counting much of social media including YouTube video advertisements. I am referring to the very expensive spots on sporting and other major events. A 30-second ad for the 2020 Super Bowl was $5.6 million. 

Over the years, Geico and Progressive have increased their presence in all forms of media. Other carriers such as State Farm and Liberty Mutual have large advertising budgets.

How many of those commercials ended up ignoring workers' compensation insurance totally? I wrote an article on a carrier mentioning workers' comp, but the one-sentence description of WC insurance was totally inaccurate. I will let the carrier that made the comment stay anonymous.

Examples of not ignoring WC insurance cost

Two recent occurrences made me write this article. One employer and an insurance agency decided to hire me to assess their current workers' comp insurance situation.  Let us look at how those worked out for the employer in both cases.

Employer assignment showed savings

An employer had recently hired a person with no workers' comp background to try to lower the experience modification factor. The person had to learn the workers' comp system the hard way: by researching and asking questions. The employer's mods for the last three years were:

• 2020 — 1.09 (not terrible but needed improvement).
• 2021 — .98 (nice improvement).
• 2022 — .83 (26% lower mod than two years previous).
• Forecasted 2023 — .80 (even lower).

I was brought in to forecast the 2023 mod. A person with no workers' comp experience reduced the mod significantly. The key here was that in 2019, the company started paying attention to its workers' comp mod.

Agent assignment requested by insured

I was brought in by an agency to reduce the mod of a very large company that operates in 22 states. Due to three significant accidents with a company that had very low-risk classification codes, the mod spiked to over 2.50.

I reviewed the loss runs, sent emails (not phone calls) to the adjusters asking about certain claims that were still open and the reserves on them. It took two years, but the forecasted mod for 2022 will very likely drop to 1.65 even with the three major claims still figuring into the mod.

How did this happen? The employer contacted the agent who contacted me for assistance. The key is that the employer stopped ignoring its workers' compensation insurance. If the insured kept ignoring the mod and comp, the mod would have likely stayed over 2.1. That would have sustained enormous premiums for years.

How to stop ignoring your WC program

If you are reading this article, you are on your way. Look over a loss run or a mod sheet and call your agent to see what can be done for your workers' comp program. If you are self-insured, your third-party administrator will provide stacks of info on how to pay attention to your program.

The formula is complacency = paying more money. Plain and simple.

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.