Time for a Checkup

Kate McGinn XL Insurance Exton, Pa. www.xlinsurance.com

AN APPLE A DAY KEEPS the doctor away, but it takes more than apples to keep worker injuries and subsequently compensation costs down. Thus, haulers may want to consider loss analyses that gather and compare worker's comp claim data to understand why claims occur and how to avoid them.

The cost of workers' compensation insurance nationwide has risen by 50 percent during the past three years, according to the New York-based Insurance Information Institute. The rise particularly can be attributed to double-digit increases in medical costs. If it costs more to pay on worker's comp claims, it will cost more to purchase insurance. Additionally, strong competition among insurers had driven prices down below cost so now insurers have been forced to re-raise premiums or stop providing workers' comp insurance entirely.

Considering additional costs, such as business interruption, lost productivity and legal expenses, businesses need to pay close attention to their workers' comp claims. The data for a loss analysis can be culled from external and internal sources. The Occupational Safety and Health Administration (OSHA), Washington, D.C., requires employers to maintain records of employee injuries and illnesses. A review of OSHA 200 and 300 logs can provide a perspective of past injuries.

Keep in mind that larger data sets lead to a better statistical analysis. Therefore, records for two or three years can be reviewed to determine where the most costly and frequent claims occur.

Other sources of information are loss runs provided by insurance carriers, third-party administrators and associations. Such organizations have electronic databases to provide timely information that can be sorted by variables. Once again, multi-year data can provide a better basis for trend analysis and comparative purposes.

Loss analyses should summarize a firm's history by identifying the number of claims and the associated costs. This can be categorized by location, injury type, job task, department and job title. The information should be presented in terms that are most relevant to a company's operation, management and corporate culture.

A frequency and severity comparison is another informative way to examine data. For example, using OSHA log data and employee production hour data, the following formula calculates frequency and severity rates for each calendar year.

Incident rate = (Number of cases × 200,000 hours) ÷ Total hours worked by all employees

Severity rate = (Number of lost time cases × 200,000 hours) ÷ Total hours worked by all employees

Calculations can be compared to the Bureau of Labor and Statistics (BLS) rates for the waste industry. The BLS rates can be accessed at http://www.osha.gov/oshstats/work.html. Businesses whose statistics significantly exceed the national averages may require more concentrated policy revisions.

Lackluster results can be a strong motivator to drive appropriate loss reduction resources to an area or safety program that needs improvement. A careful and thorough loss analysis can provide a strong line of defense in the battle against rising workers' comp costs. Sometimes it's best to scrap the apple and go in for the checkup.