It’s an irrefutable fact that commercial insurance premiums for property/casualty and workers’ compensation coverage have been increasing steadily for more than a year. Some of these increases have been remarkable. For example, overall property premiums jumped 13%, on average, between the third and fourth quarters of 2020, following an increase of 14% in the previous quarter, according to the Council of Insurance Agents & Brokers.1
In this so-called hard market, decision-makers may feel as if they are trapped between the proverbial rock and a hard place. Comprehensive insurance coverage is critical to effective operations, but surging premiums are adding financial pressure. Fortunately, there are steps organizations can take to gain more control over their insurance pricing and, in many cases, even decrease their premiums.
It all begins with loss control and mitigating your company’s risks and losses that insurance carriers consider as key components of their pricing decisions. In general, the fewer P&C losses or workers’ compensation claims you have over time, the better pricing options you will have. How your organization manages insurance claims is another important factor. Read on for six ways you can optimize your risk profile and claims management to positively affect your long-term insurance costs.
Do your homework by analyzing losses and claims
When determining pricing for a new customer or policy renewal, insurance companies commonly review five or even 10 years of data on losses and claims. Your company should be doing the same on a periodic basis by meeting with an experienced broker who can help you analyze your history.
This can help you in two ways. First, you can pinpoint problematic trends that can be addressed with employee safety and awareness strategies. For example, you might identify a high number of injuries at a specific facility; or you may discover a particular type of injury that occurs consistently. Second, you also can spot positive patterns, such as a reduction in accidents or injuries, that your broker can leverage with carriers when shopping for coverage.
With most policies renewing annually, it’s important to conduct this analysis at least three to four months prior to each of your renewal periods. This allows ample time for you and your broker to assess all your options in the insurance marketplace and avoid any surprises – such as higher renewal rates – that could result from a last-minute rush.
Drive a “culture of safety” with analysis and insights
In order to minimize accidents, injuries and other adverse events that impact your workforce and drive up insurance costs, it’s vital to embrace a culture of safety. This goes far beyond forming committees and conducting legally required training. This concept prioritizes safety throughout the organization, from the CEO to entry-level employees. All staff should be encouraged to openly report hazardous conditions, unsafe behaviors and other issues without fear of reprisal. Companies should use that feedback to improve operations and reduce their risk for a loss. Your analysis of historical loss/claims data can be used to design specific safety programs that will have the largest impact on both your employees and your bottom line. For example, if you note a rise in slip-and-fall injuries, you may address it with changes to footwear and flooring.
Be agile and ready to pivot
A key benefit to working with your broker to analyze your loss/claims history is the insight you gain into how to control future losses and minimize risks. But it’s important to remember that your organization most likely will need to show agility and make changes to some of the safety strategies that you may have become accustomed to. For example, you might have suffered significant losses in past years that correlate with heavy snowfall – and implemented programs to reduce those losses. But if you experience a warm winter, you and your broker will need to pivot to address your secondary or tertiary risks (e.g., injuries related to poor ergonomics) so that your company is not hit with a surprise uptick in these categories.
Be willing to invest in your future
An in-depth assessment of losses/claims also should go beyond aggregate trendspotting to identify how individual events impact pricing, particularly for workers’ compensation coverage. Workers’ compensation premiums are set according to a formula that takes into account what type of work each employee performs, your history of claims and other factors. By analyzing the dollar amount of each claim, you and your broker can gain an understanding of how each claim affects your premium multiplier, also called your experience mod rate (EMR). By lowering the frequency and severity of your claims, you can lower your EMR and, ultimately, your insurance premium. That could mean your organization investing in new equipment or machinery to reduce injuries. While a $20,000 capital expense for new machine guarding may seem expensive, it could save you much more in insurance costs over the long run.
Handle your claims effectively
Another important arrow in your quiver to lower premiums is to optimize your company’s internal processes for handling claims. After filing a workers’ compensation claim, be sure your organization works closely with your carrier to respond quickly to any requests for information so your carrier can successfully manage the claim. Any delays on your part may increase the costs to the carrier and result in increased premiums for you.
Also make certain your company has robust return-to-work programs in place to facilitate the safe transition of the injured employee back to meaningful and productive work as soon as possible, which will help reduce the cost of the claim. These programs can include off-site transitional duty placements which match injured workers with non-profit organizations in need of added resources.
Creating a virtuous cycle
With no end in sight for the hard market, decision-makers do not need to sit idly and wait for the cycle to turn. Now is the time to attack the hard market by being proactive. By working with an experienced broker that understands all the nuances, you can create a virtuous cycle of analyzing losses and claims, refining your safety/loss control programs, managing your claims efficiently and reassessing losses and claims to determine what works and what does not. This strategy can enable any organization to gain more control over their insurance costs at a time when it’s needed most.
For more information or to speak with an insurance specialist, call 1-800-716-8314.
This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service. It is not designed or intended to provide financial, tax, legal, investment, accounting, or other professional advice since such advice always requires consideration of individual circumstances. Please consult with the professionals of your choice to discuss your situation.
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