You cant afford to operate without it, yet you cant afford to keep paying those increased premiums. Raising the prices you charge to cover the additional expense is one option. But there might be a better way, and thats to lower the costs and risk factors that directly affect your premiums.
The most important dynamic that determines what you pay for workers compensation insurance is whats known as the experience modification factor. The government takes into consideration key criteria such as the category of your business and payroll; then computes what is the expected loss ratio for your industry. This is assigned the number 1. If your loss ratio goes below that number, the amount you are required to pay decreases accordingly. If your ratio goes up, you are required to pay that much more.
Currently, workers compensation is a hot topic in the insurance industry, says Jeff Graham, of LaPort & Associates, an independent broker in Portland, Oregon. Just recently, OSHA targeted the green industry as exceeding what should be an acceptable level of safety accidents.
That the Occupational Safety and Health Administration set their sites on the green industry may, at first, appear to be bad news. But Graham says the good news is that OSHA is there to provide assistance and help the industry get on the right track. Many landscape contractors are afraid of OSHA, but they are there to help. You might think of them almost as an ally.
OSHA has, in fact, formed an alliance with the Professional Landscare Network (PLANET). Graham, who is a member of the PLANET insurance safety committee, lists some of OSHAs main concerns about the industry:
Cuts, abrasions, and amputations. There is the need for landscape workers to be more aware of the blade, says Graham, and to keep the electrical tools and equipment off when not in use.
Not wearing protective glasses and gloves are always occasions for fines.
Lifting and stretching exercises are important to prevent back strain. Use straps so two, instead of one, can lift heavy objects. Use equipment rather than manpower when possible, such as for moving rocks.
Keep well maintained equipment.
Wear ear protection to protect against the noise of power tools.
Even office workers are at risk through poor ergonomics, especially carpel tunnel syndrome resulting from improper computer use.
Slips, trips, and falls constitute another category of accidents. Make sure you keep your work sites tidy, says Graham.
As with any contractor, vehicles are a risk factor with landscapers. Because of the nature of the work force, many landscape contractors dont have experienced drivers. Check employee driving backgrounds, and keep checking every year.
Dont become too casual with pesticides and herbicides. Be aware of possible damaging exposure.
One way to reduce accidents and lower your modification factor (and premiums) is to heighten safety awareness among the workers at your company. Graham offers several strategies to achieve that goal.
I know one landscaper who has a stretching program, which takes about fifteen minutes before the workers go off to work every morning, says Graham. It reduces the danger of back injury, but also gets everybody on the same page every morning. Its one thing to read OSHA requirements, but people get distracted and may have problems at home.
He adds that sometimes workers may feel a little embarrassed starting out on this program. But then they get into it. And every morning someone may volunteer a brief comment about an issue hes noted and how to be careful dealing with that issue.
A simple thing many landscape businesses do is post a sign as to how many days without loss time the company has gone. The sign is posted at the front entrance so the workers are reminded every day that they are building a safety record.
Graham suggests creating your own safety programs. He mentions one company that created its own drivers license (outside the official one), which has to be earned, and can be taken away for carelessness, even if an accident does not result. A program that works for one company may not work for another, because of different personalities; so try to come up with one which works for you.
Whatever the program, monetary spiffs or rewards are always good incentives. The savings generated from lowered insurance costs can be applied to whatever awards program you implement. Your workers can receive monetary incentives, while you are still saving money in the long run.
Many professional landscape associations have safety programs with various awards attached, and its always good to take advantage of those. If you do well in those safety programs, an award will certainly impress your insurance carrier.
But if you have a lousy year, should you even bother trying to compete? Most definitely, says Graham. Two companies may have only one accident, but if one has a serious accident, thats really going to hurt. Most of these programs have a most improved award. If you dont enter in a bad year, you wont have that benchmark from which to improve. And I believe its a cultural thing as well. If management says, well, Im not going to worry about it, I think that attitude filters down to the workers.
Nobody would deny that safety programs are a good thing. But suppose you already have a good record without one. Is it really that important? Are there any other payoffs?
Whether you have an excellent or lousy safety record, you should be implementing a safety program, says Graham. If youre doing well, youre practicing preventative safety. If your records are bad, you can improve them.
Here its important to realize there is often a divide between the underwriter who writes your policy and the agent you talk to, says Graham. Therefore, its very important that you have an agent who has a rapport with the underwriter and will represent you. If you have a good record and are implementing all kinds of nifty preventative measures, or have a bad record but are really making great efforts to improve, none of this will reach the underwriter unless the agent tells him.
The insurance industry knows people are struggling with rates, so if the agent conveys to the underwriter that somebody is really making the effort, whether his record is good or bad, this can have a definite monetary payoff, either way.
Its also very important to not only have an agent who is as dedicated to representing you as he is his carrier, but who is also knowledgeable about the industry. The more your agent knows about your business, the more he can save you.
Many landscape contractors dont report their payroll to their best advantage, says Graham. If you have nine people in the field, but one in the office, the rates for that clerical person will be far less. And suppose your employees come in from the field once a week for meetings or training. You need verifiable records, but these things can be separated.
Not everyone has a return to work program. This can really affect your experience modification rating. Create a job for an injured worker, even if its filing papers. He may figure that if he cant sit around and watch TV, he may as well get back to work in the field. The sooner you start paying him, the sooner workers compensation stops. This will keep the seriously injured at home, but encourage all the rest to get back to work.
Another big thing is to require your agent to inform you of your loss records, says Graham. He explains that typically, if a worker looks like he is going to require back surgery, the insurance company may set aside or put on reserve $20,000. Then, if this money is not used, it goes back into the bank.
Those big reserves will count against you in your experience modification. Agents are dealing with hundreds of claims, and Ive seen these remain open for months, working against the employer. You want to work with your agent to get the claim closed as quickly as possible.
There is one dynamic about workers compensation which sets it apart from all other types of insurance: the coverage it provides varies from state to state, and it is accordingly governed by different laws.
Some states are more litigious than others, with juries giving larger awards, says Darwin Lucas, of RISC, Inc., Dallas, Texas. Consequently, premiums are higher and coverage may be harder to find. California is always at the top of the list, as well as certain counties in New York, Illinois, and Florida. In the field of workers compensation, its difficult to say anything with certainty. Its a moving target in terms of the legislature and changes in the legal system. So you want to choose an agent who knows the field, who can make sure you are adequately covered. As with many things, the cheapest is not always the best. You get what you pay for.
According to Graham, seven states are monopolistic, which means they choose their favored carrier. The problem is that it limits competition. We have landscapers here in Oregon that do work in Washington, but are still governed by Oregon laws. However, if they set up an office in Washington, they are governed by Washington laws (a monopolistic state).
While Graham describes Oregons workers compensation as reasonable, hes not so kind when talking about its southern neighbor, California, which he says leads the pack in terms of woes for this type of insurance.
Workers compensation rates in California began increasing about five years ago, says Steve Hartman, of Landscape Contractor Insurance Services, Fresno, California, and have skyrocketed 350 percent. Those exorbitant rates were driving many companies out of the state. To stem the flow, the legislature has begun enacting long-needed reform.
One provision of Californias SB889, says Hartman, is that it includes a medical provider network, so employers can choose the doctors employees are sent to. This allows for the control of which doctors are used, and is designed to prevent fraud. The bill also promises more focused care for injured employees, so they get taken care of as quickly as possible.
This will not cure the problem with a snap of fingers, says Hartman. There are many legal challenges, but outside of trial lawyers, the measure is generally approved, or at least accepted as a step in the right direction by employers, the medical field, and labor groups. In anticipation of these reforms, rates have come down about 20 percent over last year. Another 13.8 percent cutback is expected midyear, with another 3.8 percent rolled back to the start of the year.
Its been said that, as California goes, so goes the rest of the nation. If it cures its workers compensation woes, this may presage good news for the rest of the country. Meanwhile, you can do your part to drop your rates by initiating good safety programs, and by working with an agent who knows the field and is as willing to represent you with the same care and concern as he does his carrier.