If Workers' Compensation Insurance (WC) protects your business and employees in the event of a workplace injury, you may wonder why does this blog spends so much time on safety issues? It's simple. Workplace injuries and WC claims can cost your business – both directly and indirectly and both monetarily and non-monetarily. Therefore, creating a safer work environment helps lower workplace injuries and WC Claims and their associated costs.
Let's take a look at the actual cost of injuries and WC claims.
Administrative Costs
It takes time to process a Workers' Compensation claim. You need to…
- Report incident to the appropriate party
- Complete and file injury/illness report
- Stay in contact with the WC carrier
- Stay in touch with the injured employee
- Establish a timeline for return to work
- Return the employee to work
- Continue leave or terminate when an injured employee is unable to return to work
You could find yourself – or an employee - spending a significant amount of time meeting with the insurance companies and/or lawyers until the claim is closed.
Hire Replacements
Depending on the severity and nature of the injury, you may need to hire and train a new employee to replace the injured worker. According to the Society for Human Resource Management (SHRM), it takes on average 42 days to fill a position at an average cost of $4,129. Furthermore, research shows "it takes at least 1 to 2 years before an employee is 'fully productive.'" Therefore, even after you've hired a new employee, it could take two years for them to be as productive as the injured employee.
Decreased Productivity
Immediately following an accident, work may slow or completely stop as you take care of the injured worker, investigate the incident, and possibly take temporary safety measures to ensure it doesn't happen again. Depending on the employee's role, you may need to find someone to replace them before work can resume. Finally, research shows "the aftermath of a workplace fatality can have long-lasting effects on other employees' emotional health, productivity, and safety." Furthermore, "the death of a coworker can affect all employees, regardless of whether they witnessed the incident, worked in the same department or were close with the deceased worker."
Legal Action
Not all Workers' Comp claims are legitimate. If you believe a claim is fraudulent, you may decide to take the case to court, which will cost you additional time and legal costs. In addition, if you lose the case, you could end up paying more than if you had settled.
Increased WC premiums
One of the most significant effects a WC claim can have on a business is increased WC premiums. Depending on the nature of the claim and resulting costs, one claim probably won't affect your WC premiums.
However, your premium is based on the following formula: WC Premium = Classification Code Rate X Experience Modifier X payroll/$100. Your experience modifier compares the history of your losses to what is typically expected in a class similar to your company. It is based on the following:
- Number of Claims
- Cost of Claims
- Frequency of Claims
- Severity of Claims
- Closed vs. Open Claims
- Claims History of other businesses in your industry
- Years in business
- Number of employees
- State minimums
- If your experience modifier goes up, your premiums go up.
Lower Workers' Comp Costs
Bottom line: fewer claims mean lower costs. Another way to lower insurance costs is to work with one of the experienced independent agents at American Insuring Group. We're free to shop and compare pricing, so you save!
Give us a call today at (800) 947-1270 or (610) 775-3848, or connect with us online.
