The real costs of work related injuries
 July 30, 2013

You completed the annual renewal process for your workers' compensation policy. After a review of the required deposit and scheduled installments you now know your workers’ compensation insurance premium costs for the coming year. But is this really the cost of workers' compensation for the coming year?

It's probably not. The premium covers your expected losses and policy expenses generally associated with underwriting and claims management. Beyond that there are a host of indirect cover and support costs that are not covered by your workers' compensation premium. The support costs are those expenses associated with OSHA compliance. Safety support is necessary to maintain an effective injury and illness prevention program (IIPP). If this support is not part of the services provided by your workers’ compensation insurance carrier, you must fund the resources necessary to ensure you are operating in compliance and effectively protecting your employees.

Now, what happens if someone is hurt on the job? The medical treatment and any other benefits are covered costs under your workers' compensation policy, but the most costly component of work-related injuries is often the indirect cost. The industry uses the term "tip of the iceberg" to describe the cost of your workers' compensation policy, usually the premium. The indirect costs are not insured and are direct expenses. They can include costs associated with:

Now, what happens if someone is hurt on the job? The medical treatment and any other benefits are covered costs under your workers' compensation policy, but the most costly component of work-related injuries is often the indirect cost. The industry uses the term "tip of the iceberg" to describe the cost of your workers' compensation policy, usually the premium. The indirect costs are not insured and are direct expenses. They can include costs associated with:

  • Time off of work for injured workers to go to medical appointments
  • Production down time
  • Administrative costs for processing claims
  • Additional overtime pay required to make up for lost time and productivity
  • Time to find and hire a replacement
  • Interviewing and training new employees
  • Delays in filling orders and shipments
  • Damage to products
  • Unwarranted negative media attention
  • Potential OSH A penalties
  • Attorney fees
  • Damage to equipment, machinery, materials and the facility
  • Higher workers' compensation premiums in subsequent years
  • Loss of reputation
  • Degraded client loyalty and support
  • Managerial costs to complete accident investigations
  • Loss of employee time associated with assisting with the accident
  • Conducting accident witness interviews
  • Loss of employee morale
  • Slowed work pace due to other employees fearing injury

We often ignore the indirect costs because they are hard to measure, but a number of sources including Federal OSHA indicate the indirect costs can range from one to four times the direct costs of claims. All of this is a prelude to making sure your loss prevention program is current, effective and addresses workplace hazards. After all, an accident that never occurs has no direct or indirect loss cost.

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