Get Workers' Comp Costs in Line

03/05/07

According to Phyllis Severance, attorney and principal of Workers Risk Services in Burlington, Vermont, the average workers’ comp claim takes seven years to wind its way through the medical, insurance, and legal systems. “That’s why,” she maintains, “you need to manage the people on your workers’ comp team—insurance carrier, agent, and claims adjuster—to get the most out of them. The consequences of not doing so can be costly.”

Manage Your Agent
With only one workers’ comp insurance carrier willing to deal directly with employers (Liberty Mutual), you’ll most likely work through an insurance agent to get coverage.

Severance says it is important that your agent take the time to understand your business from a workers’ comp perspective. If necessary, educate the agent so he or she understands the goods and services you sell and the markets you sell into, the kinds of jobs your employees perform, and the potential safety risks of doing these jobs.

In addition, you should expect your agent to help you classify the jobs in your payroll accurately so you don’t overpay. Every so often, have your agent obtain quotes from different carriers and have him or her explain how coverage and service vary from firm to firm.

Finally, observes Severance, expect your agent to assist you in resolving problems effectively. “They can be an effective squeaky wheel when problems arise.”

Agents can also help to ensure your experience modification rate (mod rate) has been calculated properly. (The mod rate raises or lowers your premiums based on the number of accidents you have over the course of several years.) The mod rate can have a huge impact on your premiums, so it’s important that your agent check to be sure past claims are resolved quickly and don’t have more of an impact on your rate than they should.

Manage Your Carrier
Severance is adamant: Deal only with insurance carriers rated “A” by A.M. Best and Company. Grade-A companies have the financial strength to handle your claims efficiently and are most likely to stay in business for the long haul. The carrier should also have an established record of success with workers’ comp. “Experience in other lines,” notes Severance, “is not transferable to workers’ comp.”

Carriers should also stand ready to help you improve safety by offering:

Safety inspections with loss-control experts knowledgeable in your business.

Specific suggestions for improving safety.

Safety videos and other resources for safety education.

Severance, however, offers this caution: “Safety can’t be delegated to your insurance carrier. No one knows your business like you do—they’re not going to see what needs to be seen. The carrier’s loss-prevention specialists are good as a second set of eyes, but they should never take the place of policing your own shop.”

Manage Your Adjuster
Claims adjusters are the first ones to look into the validity of a claim. They’ll investigate the injury by talking to witnesses, company personnel, medical practitioners, and anyone else connected with the event. They’ll accept or deny the claim, and oversee any payouts.

You have a lot of money riding on the adjuster’s recommendation, since any approved claim eventually affects your mod rate. Like the agent, adjusters need to understand your business, your employees, and the medical providers in your area. If necessary, educate them.

It’s important that the adjuster conduct a professional investigation that results in an appropriate decision to accept or deny the claim. “Avoid carriers that indicate they’ll do a good job denying claims,” says Severance. “The adjuster should make sure the injured party gets the benefits the law provides for, not the least amount of money possible.”

The adjuster, continues Severance, “should be collaborative, not adversarial. He or she needs to have good rapport with local medical people and use techniques like independent medical exams and surveillance appropriately. Fighting a claim hard is a no-win situation, and such techniques don’t always deliver the bang for the buck.”

That said, the adjuster should make use of medical consultants or nurse-case managers to review medical decisions, and they should follow up appropriately on suspected cases of fraud.

You should also expect adjusters to:

Respond to an injury report within twenty-four hours.

Ensure that medical providers are paid in a timely fashion.

Pursue subrogation opportunities (get some other involved party or insurance carrier pick up part of the bill if appropriate).

Answer your calls in a timely manner.

Provide timely updates on outstanding claims without invading anyone’s privacy.

Finally, Severance says the adjuster should have a specific strategy for getting an injured worker back on the job. “Ask, ‘What’s your plan to get this claim to a conclusion?’ A bad answer to this question is, ‘I’m waiting to see.’ Insist on being involved, and don’t accept unresponsive service.”

Finally, don’t forget your goals in managing any workers’ comp claim: You want to preserve the working relationship you have with your employee, and you want to get that person back on the job as soon as you can—safely.