By Ryan J. Wellman, AAI – Brown & Brown of Detroit
Workers’ compensation is a polarizing topic for many businesses- many don’t understand it or don’t think they have any control over it. There are many reasons for this misunderstanding. Coverage can be complex, but clarity empowers employers to take control of current claims and implement measures to mitigate effects of future ones. Analysis of claims history is one way to paint a picture of underlying issues and provide a road map for improvement and control. This article outlines how an analysis of workers’ compensation claims can add value to your clients.
Accidents happen, that’s life. One of your employees stubs their toe on a filing cabinet so you send it in as you should. A week later another employee nicks himself with a box cutter so you send them to the clinic. Then the panic sets in on how this will affect your loss history and you wonder what options you have to control this. When analyzing the data on your claims history evaluate the medical only or “first aid” claims. These are usually small and more often than not ignored by companies. Insurance carriers don’t just look at the severity of claims but frequency as well, both components influence a company’s experience mod which directly relates to premium costs. Solutions exists to filter some of these claims out before they make it to the insurance carrier and before affecting a company’s experience modification. Medical triage programs can be implemented to provide onsite first aid care to employees with minor injuries, although more serious ones will still need to be treated at an appropriate medical facility. This not only changes company culture but also roots out potential fraud, both of which provide tremendous return on investment to the business.
Understanding ones claims costs and ways to influence it are only pieces of the puzzle. It’s up to the broker to partner with their client to evaluate and review their experience modification factor. Each year of claims activity will affect a business for three years on their experience modification calculation. Evaluating the make-up of their experience modification provides insight on how every year stacks up on actual versus expected losses, providing a benchmark. If a client has a bad year then they can assume their experience modification to trend up in coming years. An experience modification review can help determine what a business’s losses would have to look like to have an average experience modification of 1.00 or less. Most businesses don’t know what their floor could be but this review will help provide feedback that gives the client something to aim for.
Companies are adopting data analytics with increasing frequency on sales and operations but the same level of scrutiny hasn’t made its way to insurance with as much fervor. Simple, yet continuous monitoring alongside proactive programs and procedures can yield real results regarding claims history and cost. By shedding light on issues like this, claims analysis can provide tremendous insight and future cost savings to businesses.