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Hidden Cost in Your Workman's Compensation

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.
  1. Designate one individual as claims coordinator, to whom ALL injuries are immediately reported- Suggestions are HR manager, office manager or controller.
  2. Fill out all injury paperwork as soon as practical and follow state guidelines for reporting.
  3. Claims coordinator is the only person to work with the insurance agent regarding reporting of injuries.
  4. Claims coordinator is to work with your agent to determine if injury is immediately reportable. If you have a large deductible ($1,000 if your policy allows it, may reduce your rates) your agent may advise you to pay the claim on a minor injury.
  5. Back/Neck injuries are always high-risk injuries as well as any injury involving lost time.
  6. Have a pre-arranged location for all injuries to be treated such as the local clinic or hospital. Local clinic is a better choice due to follow up unless it is a serious injury that can't be treated there.
  7. Claims coordinator must follow the entire injury and recovery. The goal is to get the employee healed, released and back to work as quickly as possible.
  8. Employees must report each visit for treatment to claims coordinator as well as progress reports.
  9. Make it policy that injured employees must attend every scheduled visit. You would be surprised how many employees "feel better" so they skip follow-up appointments which delay return to work releases.
  10. Keep lines of communication open with facility that provided treatment. Most will release appointment schedules with you to insure that the employee follows through.
  11. If the employee can return to work in a limited capacity make every effort to utilize them—every dollar they draw in payroll reduces the amount against your claims loss record. You can ask the medical provider if this is possible, your employee may think just because he can't do his regular job he can't come back to work.
  12. Employees must have work release to return to work. Skipping final appointments because "I know I can go back to work" are not acceptable and usually end in a more costly claim.
  13. Make sure that everyone at the dealership knows the plan of action. Who-who is in charge of claims, what-all injuries are to be reported, where-facility chosen for treatment, and when-immediately notify claims coordinator.

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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