Questions are a daily part of a business owner’s life. Is there enough inventory to meet demand? How to balance staffing needs vs. payroll restrictions? Can profit margins be increased? However, an important question contractors might not be asking is how much profit has their experience mod caused their business to lose over the last few years?
Contractors are often shocked to discover that in some cases they have lost more than $350,000 over the last 10 years. And that can be a devastating blow to the long-term profit margin. Even though these contractors were all getting the most competitive quotes from their agents, they still lost money, money they could have put back into the company or used to give themselves bonus. Unfortunately, this happens all the time.
Some may think lowering their experience mod is beyond their control. The next 10 years can be completely different from the previous 10 years, but only if contractors start doing the things that make a difference. Keeping their experience mod low is a two-sided coin: prevention and claims management.
Without both sides of the coin, they will have a high experience mod.
Nothing drives up the experience mod like workplace injuries that languish for months as open claims. If contractors believe that “accidents will happen,” they will, and they will pay for them with skyrocketing premiums and possible OSHA fines. Safety is the message their employees need, a message that filters from the top on down. It needs to be the culture of the business.
Start by organizing a safety committee to audit workplace safety, implement safety procedures and keep everyone up to date on training. When employees are involved in creating a safe environment and are responsible for their own safety and the safety of their fellow workers, the mentality shifts from “accidents will happen,” to “everyone goes home in good health today.”
The other equally important side is claims management. The point of claims management is to close claims as quickly as possible, ensuring the impact on the experience mod is at its absolute minimum. To create the foundation for effective claims management, business owners need to remember three key points: preparation, direction and communication.
- Preparation. Construction can be a dangerous business, but owners should hope there’s never an accident. Still, they need to prepare like one could happen any day. Create a Physician’s Panel of workers’ comp qualified doctors. Develop an employee handbook that outlines the proper procedures and expectations after an injury. Without a written policy for such items as how to report an injury and return-to-work expectations, employees are left to manage their own claims, which will ultimately cost the business thousands of dollars. Regarding return to work, owners need to plan for it by creating a transitional duties job bank. If they prepare, almost any business can offer transitional jobs to recovering employees. This could be a lifesaver in protecting their experience mod from taking a serious hit.
- Direction. Business owners need to make sure they direct their injured employees on what to do and where to go should an incident occur. Even in states where employees can choose their own doctors, many employees will use the company’s choices because it’s easier to follow that recommendation than it is to figure things out for themselves. Many employees feel lost when they are injured. Give them direction and they will often follow it.
- Communication. When employees are out with an injury, keep communicating. Let them know they are part of the team and that they are needed. Make them want to come back, and more often than not, they will. Also, communicate with the doctor. Don’t let him lose sight of the common goal: to get the employee back to their regular life and work as soon as possible. Let them know there is a return-to-work plan and that the company will accommodate the injured employee with whatever restrictions the doctor recommends. If the company has a prepared job bank for transitional duties, then there will almost always be that ability to bring an injured employee back.
Focus on both sides of the coin. If a business has no claims management procedures, even with the world’s best safety program when something slips through the cracks, the effect on the experience mod could be just as bad as if there was no safety program at all.
For example, a large construction company had an experience mod well over 1.30, even though it focused almost solely on safety. The company had a safety manager and had hired a safety consultant firm. There were few injuries, but the company did not have the concept of claims management. The company let injuries run their course, believing the only thing they could do was to prevent more injuries. They didn’t realize that a claim is the most expensive it will ever be when no one does anything about it. Had they focused on closing the claims and getting the right help to manage them, their experience mod likely would never have gone above a 1.0, and they would have kept hundreds of thousands of dollars in their pocket over a five-year window.
Business owners need to take steps now to maintain control over their experience mod. As a result, they will have fewer claims, and the claims they do have will be smaller. That’s a win-win for everyone.
