A Brokers Approach To Managing Workers’ Compensation
 June 18, 2012

If you’ve read any business journal, industry publication, or newspaper over the past six months, you read about the fate of workers’ compensation insurance in California.

Back in November of 2011, the California Insurance Commissioner Dave Jones approved a 37% increase in workers' compensation rates for 2012. This decision meant California based employers would soon be realizing an increase in their insurance premiums for 2012.

Now six months later, Dave Jones went against the pleas of labor and employer representatives and sided with the insurance industry, along with the Workers' Compensation Insurance Rating Bureau (WCIRB) in approving an 8.3% increase.

If you add the 8.3% mid-year rate increase to the 37% rate increase approved last year, California employers will continue to pay more for workers’ compensation insurance come July 1, 2012. It’s also worthy to mention several California admitted insurance companies filed new rates with the California Department of Insurance for workers’ compensation policies effective May 2012. On average, the combined rate increase was 14.8%.

It’s no secret the cost of workers’ compensation insurance in California is swiftly moving from a "soft pricing market" to what most consider a "hard pricing market" and employers may be asking what are the indicators driving up the cost of workers’ compensation insurance.

Recently, the Sacramento Business Journal published an article entitled "The Health of Workers’ Compensation" and sited several key indicators – a weak economy, high unemployment rates, rising claims frequency, and medical inflation. The article also cited another reason for the underperformance of workers’ compensation in California, rate inadequacy. Chris Cunniff,
Senior Vice President and Product Manager for workers’ compensation at Liberty Mutual, stated that, "the biggest driver of rate inadequacy has been
companies filing deviations or discounts below bureau loss cost levels in an attempt to retain or win business."

The reality is, of all the lines of Property & Casualty insurance and workers' compensation insurance will see the greatest increase in cost over the next couple of years. From an insurance brokers perspective, now is the time (if you are not already doing so) to take a proactive approach to managing your insurance program.

    As you prepare for your renewal, it’s important to keep in mind not all rates change uniformly. Rates for some classifications could go up and some could go down. Knowing how much your renewal rate is changing is valuable information when meeting with your broker to discuss a marketing strategy.

    Begin the renewal process at least 120 to 90 days prior to your renewal date. This is a great opportunity for you and your broker, to review the status of any open claims, discuss claim trends, as well as, how those trends will impact your workers’ compensation experience rating and overall cost of insurance.

    This is also a great time to discuss insurance carrier selection, along with establishing a time table for a pre-renewal and renewal meeting. NOBODY LIKES SUPRISES!

    Meet with your insurance broker on a quarterly or semi-annual basis, to ensure your business needs and trends (increases in payroll, risk management & safely program, etc.) are in line with your insurance program.

    And finally, work with your broker to evaluate and build a solid risk management & safety program, integrate this program into your daily operation, investigate all injuries and illnesses, ensure your employees are thoroughly trained and monitor your program for continuous improvement.

A proactive approach to managing your insurance program will not impact the decisions made today by the California Insurance Commissioner and insurance carriers, but it will definitely put you in the best possible position to manage your overall cost of workers’ compensation insurance by addressing what you can control.

by Warren G. Bender

Warren G. Bender Co. is one of the largest independently owned brokerages in the Sacramento area and proudly provide innovative solutions to our clients in the Western States. Their market position enhances their influence and strategies on behalf of their clients and customer. This allows their clients to concentrate their time and energy on running successful businesses and leading more fulfilling lives.

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