Begin a conversation with any roofing contractor with the words workers’ compensation insurance and profits in the same sentence and you’ll probably be met with a confused look. By all accounts those two topics do not go together. For many contractors the expense of workers’ comp coverage is directly in the path of the profit. Can an insurance agent help the contractor obtain greater profit? If so, how?
What are the drivers behind the workers’ comp expense? Who is ultimately responsible for managing the expense of workers’ comp? The answers to these questions will help bring about a change in the thought process that will lead to more profits for the roofing contractor.
The real problem with workers’ comp is a misunderstanding of what workers’ comp is. If it is to serve as a no-fault protection for employee injuries and keep employers from unnecessary litigation, a good area to look at is–why are the employees getting hurt in the first place?
Many times employers have an ineffective safety program, one that allows employees to be placed in a position that increases the opportunity for injury. It’s not necessary for the employer to say, “Go up on that roof without the proper safety protection in place and don’t take the time to tie off the ladder,” for the employer to be at fault. In fact, the mere silence of knowing unsafe behavior is occurring and NOT doing anything about it creates a culture where supervisors start encouraging unsafe behavior more frequently, putting employees in harm’s way more frequently.
However, even as more employers emphasize safety, injuries are still occurring. The last 10 years have seen a greater awareness of safety and its impact on workers’ comp. While improvements have been made, U.S. Department of Labor Occupational Safety and Health Administration statistics indicate there remains vast room for improvement. First, OSHA has deemed the roofing industry as the fifth most dangerous due to fatality statistics. Second, 69 percent of all citations given to roofers by OSHA occur within the top six categories, out of a total of 76. Third, three of these categories all relate to a specific hazard–fall protection. Scaffolding, ladders and head protection make up the other top six citations.
In addition, while there is still a need to improve worker safety, costs are rising despite a slowdown in claims.
What happens after an employee is injured is just as critical as preventive measures in controlling the workers’ comp expense. Employees will go one of two directions after an injury: a quick return to work or a prolonged voyage through the maze of the workers’ comp system, sometimes never to return.
Claims management is usually described as a function of the insurance carrier adjuster, the medical provider, etc. In fact, for the employer it starts even closer to home. Claims management begins with the hiring process. It continues with the culture that permeates the company from top management down. It is communicated to the employee with the activity (or lack thereof) surrounding safety. Then, when the inevitable does occur, what steps does the employer take? What is the perception of the employer’s response to the injury? Will the injured employee feel as if the company could care less? Will the injured employee be left to swim the confusing and murky waters of the workers’ comp medical system without any assistance? The response from the company and its attitude towards injuries at this stage is critical to claims management.
Just as claims management begins with the hiring process, so does controlling the expense of workers’ comp insurance. In fact, contractors concerned with fraud can combat it with the implementation of two small changes to their hiring process. The implementation of a post-offer, pre-employment physical in combination with a comprehensive medical questionnaire completed by a physician can virtually eliminate the hiring of workers’ comp claims.
In addition to the hiring process, which is the employer’s responsibility, there are insurance agent breakdowns. These include failure to control the annual premium audit, failure to control the Experience Modifier Worksheet, and failure to monitor claims, which includes the status, the reserves and the subrogation, when possible. When agents sell the policy to contractors there seems to be great discussion regarding safety and its impact but little follow-through with how to implement strategic action plans to create the savings. It is important to examine each of these areas separately; there is a direct relationship to the contractors’ performance in these areas to the money they take home: the profits.
An employer has one insurance number that combines all of their experience in the area of claims, claims management, safety, the annual premium audit, classification codes, which either rewards the employer for good behavior or penalizes them for poor performance–the Experience Modifier, or Ex-Mod. Profits for the roofing contractor can be directly tied to the Ex-Mod. When the Ex-Mod is high, the contractor will pay more for their insurance premiums. When the Ex-Mod is low, the contractor will have the opportunity to win bid jobs against their competitors who do not have a low Ex-Mod.
One thing all roofing contractors agree on is that the cost of workers’ comp is high. They all consider it to be a cost of labor and look to reduce it in any way possible. Agents historically have provided little in the way of written, strategic processes to assist roofing contractors with lowering the cost of the insurance. Insurance carriers were not much better; contractors want underwriters to know more about their company and want more than cursory safety reviews.
Insurance agents can help roofing contractors increase their profits by being partners with them. Effective strategies include:
Roofing contractors can achieve lower costs on their workers’ comp program by hiring an expert, who will have the specialized knowledge, experience and resources to make a long-term impact on the expense of workers’ comp insurance. The end result is happier employees who do not want to file claims and roofing contractors with more profits.