|To start with, I would like to clarify a couple of things. First of all, I am not an expert. I have learned from my mistakes and the mistakes of others more times than I care to count. I do, however, have quite a bit of practical experience on this particular subject. Most of my experience on this subject comes from my position prior to entering the automotive business. I was the controller for a multi-million dollar construction company that performed mine-related construction across the United States, an industry that pays steep workman's compensation rates. I am not an attorney nor am I a licensed insurance agent so for specific rules and regulations that apply in your state, consult your attorney or licensed insurance agent. There are some general lessons learned in other industries that can be applied to any business and controlling workman's compensation is one of them.|
There are two ways to address workman's compensation. The first is risk management, which is the ability to identify risk factors that contribute to injuries and correct them prior to an injury. Everyone should spend time on this. The second is before and after the injury that has occurred. A plan of action that can help you minimize headaches and long term cost to the dealer. I intend to address the second one.
Many people do not understand workman's compensation rates and classifications. There are variations in insurance laws from state to state, however many of the same concepts apply regardless of the state you reside in. Your insurance carrier has a rate based on the state your employees work in and that rate is dependent on the job classification of the employee. In most states, your cheapest workman's compensation rates are on your clerical staff, then your sales staff and then your detail and service personnel. It is very important for you discuss with your insurance agent the classifications that are available and classify your employees as accurately as possible to minimize your rates.
In addition to the rates and classifications, there is another factor of those rates you pay that can make a significant impact in the amount of your premiums. It is called a mod factor or experience rating. This little item is a percentage that is applied to your policy based on your workman's comp claim losses. If your mod factor is .88 then you are paying 88 percent of the rates on your policy. If your mod factor is 1.25, then you are paying 125 percent of the rates quoted. This doesn't sound like much, however when you consider you generally pay this rates based on payroll paid, it will add up to a large sum of money in a short time span at most dealerships.
Most dealers have the ability to work the mod factor down over a period of time through risk management and a consistent plan of action. The following is a Plan of Action Outline of practical things you can do to help minimize headaches and long term cost to the dealer.
PLAN OF ACTION FOR WORKMAN'S COMPENSATION
Remember, the goal of all of this is to minimize the claim loss through proper management and follow-up with your injured employee, therefore lowering your future premiums. This can be obtained through long term commitment and consistency in claims as well as diligent risk management. Anything that increases the bottom line is POSITIVE!
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