Zero Culture Begins at the Top: Part 3

Sunday, March 14, 2004 | 0

Zero Culture Begins at the Top: Part 3
"Bottom-Line Benefits of Zero Culture"
By Brent Heurter
Part 3 of a 3-part series

In Part 1 of this series, we introduced the concept of Zero Culture: a revolutionary mindset in which the top executive takes control of workers' compensation and instills a total cost-control culture within the organization. In Part 2, we explored each of the seven building blocks of Zero Culture. In this final segment, we'll show you how Zero Culture directly translates into bottom-line savings.

The Proof Is in the Savings

How do I know Zero Culture works? I know because I've refined and defined this approach over the last 16 years. I've seen hundreds of thousands of dollars formerly spent on workers' compensation premiums flow to the bottom line of companies that made Zero Culture their goal. Here's the proof.

1. Zero Injuries. This one is a no-brainer. If you have Zero Injuries, you will achieve Zero Mod (#7). Need more motivation? Consider these statistics from Liberty Mutual's annual Workplace Safety Index. The cost of workplace injuries is growing faster than the rate of inflation, and now stands at nearly $1 billiona week! The top three injury causes represent 50.1% of the costs of serious injuries in the workplace. Imagine if you could eliminate just those three injuries from your workplace. Here is the top 10 list for 2001 (the most recent year statistics available) with annual costs to employers, as identified by Liberty Mutual:
1. Overexertion: $12.5 billion
2. Falls on same level: $5.7 billion
3. Bodily reaction: $4.7 billion
4. Falls to lower level: $4.1 billion
5. Struck by object: $3.9 billion
6. Repetitive motion: $2.9 billion
7. Highway incident: $1.9 billion
8. Struck against object: $1.7 billion
9. Caught in or compressed by equipment: $2.3 billion
10. Assaults and violent acts: $0.4 billion

2. Zero Delays. Every day of delay adds approximately $500 to the cost of a workers' comp claim, and a recent insurer study reported that a delay of as few as five days can add 15% to the claim costs. In addition, early reporting ensures that the employee receives benefits in a timely manner, reducing the likelihood of litigation. Figure 1, compiled from National Council on Compensation Insurance data, shows that claims with a reporting delay of four weeks are nearly triple the cost of claims that are reported within one week.

A study by St. Paul Companies found that as a group, late-reported claims had increased costs of about 29%, and another insurer study found that late reporting added almost $3,000 per lost time claim. The conclusion is a no-brainer: the sooner an injury is reported, the sooner the care and planning can begin.

3. Zero Lost Time. In California, an average lost-time claim is more than $50,000. In contrast, a medical-only claim averages about $500. For a typical California employer with 100 claims per year, 24 of them will be lost time claims for a total of $720,000, and 76 will be medical only claims, for a cost of $38,000. The total cost for all these 100 claims will be $758,000. Employers who plan ahead and immediately provide transitional work assignments for all injured workers can reduce the proportion of injuries that end up as lost time claims and achieve substantial claim cost reductions. For example, if instead of 24% lost time claims there were only 5%, the combined cost for those 5 lost time claims would be $150,000, and the combined cost for the 95 medical-only claims would be $47,500, so the total cost for all 100 claims would be only $197,000 (compared to the $720,000 for a typical employer). By reducing the fraction of lost time claims to a level that occupational physicians see as realistic, a saving of $523,000 could be achieved. Just reducing lost time claims to 15% would yield a savings of more than $200,000.

4. Zero Errors. Sixty-four percent of audited workers' compensation premiums contain overcharges. That's a staggering statistic, but premium review experts who look for overcharges claim it to be true. Depending upon whom you speak with, the amount of the average overcharge can vary from a low of 8% to a high of 20%. For an employer paying $100,000 in annual workers' compensation premiums, that's $8,000 to $20,000.

5. Zero Fraud. Estimates on the impact of workers' compensation fraud by employees on individual employers are hard to come by. But even the most conservative estimates place the cost at more than $1 billion a year. If you are the victim of workers' comp fraud, national or state estimates of fraud costs are meaningless. Here's one outrageous example: According to an ABC News report televised in March 2004, former Pinellas County, Fla., bus driver Bruce Gilbert faked a brain injury that he claimed was the result of a workplace injury, he collected $774,000 in workers' compensation. Although he claimed to be unable to work because of a mental capacity of a five-year-old child, he was able to pursue his favorite hobbies of hunting and playing golf. When investigators caught up with him, he was driving a golf cart.

6. Zero Litigation. Reducing attorney involvement starts with benchmarking current litigation rates, setting target reductions, and building the communication and support programs that will help to attain these targets. When employees know, right from the start, that their claims will be handled fairly and promptly, they are less inclined to seek legal representation. And that means less costly claims. On average, claims without litigation cost less than half as much as those with attorneys involved.

7. Zero Mod. The bottom line reward for good management is obtaining Zero Mod: the lowest ex-mod you can possibly achieve. Along with that lower mod comes lower premiums.

An X-mod of 1.0 represents the industry average; anything over that is worse than industry average, and anything under 1.0 is better than industry average. The important consideration is working to achieve the lowest (best) possible X-mod for each industry class.

There's no rocket science involved in the seven building blocks of Zero Culture. In fact, you may be using one or more of them already. What's unique about our approach, and what I hope we've proved to you, is that these strategies save you money. By using them, you'll see a dramatic difference in your work culture and your workers' comp costs.

Brent Heurter is the Founder and Chief Solutions Officer of ClearComp, a workers' compensation alternative for companies that desire to control and reduce their workers' compensation costs. Brent can be reached at 888-CLEAR-89 or email brent@clearcomp.com.

The views and opinions expressed by the author are not necessarily those of workcompcentral.com, its editors or management.