Selling workers’ compensation comes at a price. In 2013, underwriters generated a loss of one percent for every premium dollar written. As such, agents also face many financial constraints, making this line of insurance anything but a solid business venture.
For decades, with the exception of 1995 and 2006, this instability has been the line’s calling card. For the past 20 years, underwriters have averaged a four percent loss, with some annual losses as high as 23 percent. While some years have proven more tumultuous than others, workers’ compensation cannot viably stand alone without a positive external investment. Workers comp underwriters are also routinely victims of litigation, fraud and costly claims. By and large, workers’ compensation insurance is at best a zero-sum game for carriers and employers.
But all is not lost. There is a way to make workers’ comp a profitable line, and now is the time to act. With financial uncertainties lingering in the health care industry because of the Affordable Care Act, it is more critical than ever before for agents to understand the underwriting market and inject their own strategy into securing a cheaper, more effective workers’ compensation model that will yield their business an actual profit.
Whether underwriting workers’ comp insurance yourself or selecting an underwriter, the only concrete way to improve the line is to control claims. Here’s how:
1. Make claims management a priority. As an agent your contracted claims management policies and procedures powerfully influence the ultimate outcome of a claim. Whether you work through a Third Party Administrator or rely on claims services for your carrier, you should be scouting an efficient, effective claims adjustment system. This means that claims are not assigned to a number of different adjusters based on its stage of life. When this occurs, one adjuster ends up passing the claim off to another, and the cycle continues until the entire system is comprised of a disjointed staff working with convoluted and incomplete information. Handling claims in this way will result in costly inefficiencies.
The key is to ensure a single claims manager is wholly accountable for the processing of each claim throughout its lifespan. This system makes it much more likely that information about the claim will be well-organized, reports will be filed properly and on time, and, most importantly, that there will be a clear focus on closing the claim quickly and cost-effectively.
2. Build relationships with doctors. Building the profitability of workers’ comp is in the details, and this is no more evident than when creating and managing a preferred provider organization. When too many doctors are in the preferred provider organization (PPO) – such as in general health care networks, which may include thousands of “recommended” physicians – you lose an essential, uninterrupted path of communication throughout the medical process.
Researching, vetting and selecting just three physicians for a PPO network allows you and your client to build long-term relationships with quality physicians who are well-versed in workers’ compensation laws. Good physician relationships allow you to work with the doctor to ensure proper care, reporting and expediency in healing and getting the injured worker back on the job.
3. Work with clients to develop a return-to-work strategy.Every day an injured worker stays at home is another day that worker accrues mounting lost-time compensation, remains physically idle and is disconnected from his or her employer. Staying at home longer than truly necessary brews a perfect storm of litigation risk and claims cost.
Educate your clients on the importance of getting an injured worker back to work, even if he or she has not fully healed from the injury. By developing specific modified- and light-duty job descriptions, injured employees have a clearly-defined avenue to get back to work without worsening their injury or slowing the healing process. Work with clients to ensure that there is a job description ready and waiting for a worker who may not be able to walk, use one or both hands or perform manual labor.
4. Put effort into communication.Awareness and communication are the two most powerful and essential tools for claims control. Being proactive with employer expectations and claim-related policies will create a path of expediency and efficiency. The key word here is proactive.
Conduct regular meetings with clients to ensure they are aware of your claim reporting timeline (24 hours is the optimal recommendation), that they are aware of what happens on the back-end of a claim, that they know who to contact with questions (the claims manager) and that they are clearly making their employees aware of reporting protocols and the physicians panel. Staying informed prior to an injury occurring is the best way to ensure a smooth claims process after an injury.
In my experience, implementing these strategic measures can reduce claims cost by an average of 30 percent – which turns workers’ comp from a money loser into a profitable line of insurance.
Lile is the founder and CEO of OccuSure Workers’ Compensation Specialists, a Brentwood, Tenn. managing general agent specializing in lowering workers’ compensation claims.
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