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Employers all around the country can expect across-the-board rate increases for workers’ compensation insurance in 2001, according to one analyst. When policy renewals come due in 2001, employers may be in for a real shock, says Mike McGowan, vice president of Staffing Risk Solutions, a full-service risk management services company in Fort Lauderdale, FL.
"Costs, on average, will increase 20% to 40% nationwide, and employers with poor experience in 2000 may be looking at increases exceeding 60%." McGowan says the increases are a symptom of the "hardening" of the insurance market. Overall, insurers did not achieve the profit levels they had anticipated in 2000 and, therefore, are more discerning about the risk they will carry and the policies they will write in 2001, he says. As a result, employers with poor experience and few safety controls in place in 2000 not only will experience significant increases, but may have difficulty finding a carrier altogether.
"In general, carriers will be looking to reduce exposure and liability and increase their profitability by targeting employers with proven controls in place," he says. To combat the increased costs, McGowan says some employers are turning to staffing companies to help insulate them from increased risks and workers’ compensation costs.
John Cox, safety services director for Tandem Staffing, an industrial staffing company in Delray Beach, FL, that places about 23,000 employees per day on job sites throughout the country, says he is seeing the same trend. "This is a natural reaction from employers. We’ve already seen an influx of calls from employers wanting to know how they can combat these cost increases," Cox says. "The good news is that the issue of safety has come front and center; the bad news is that it’s taken these unfavorable market conditions to move employers to action."
Now that the workers’ comp increases are high, there may be little that occupational health professionals and employers can do to reduce rates immediately. But Cox says the higher costs are proof of what happens without adequate attention to workplace hazards and illnesses. "Employers looking for a quick fix to the problem of effective safety programming won’t find it," Cox says.
Nevertheless, Cox says that through effective risk control implementation and monitoring, risks can be limited and experience positively affected. He points out that Tandem Staffing will experience only a moderate workers’ comp rate increase in 2001 because its experience the past two years was well below industry averages.
Garry Meier, president and chief executive officer of Outsource International, Tandem Staffing’s parent company, which is also in Delray Beach, says there’s a direct correlation for business leaders. Tandem’s below-average injury and illness history will help it remain price-competitive in the marketplace, while other staffing companies may be forced to raise rates considerably due to higher-than-anticipated workers’ comp costs. "We are probably the most aggressive staffing company when it comes to risk management," Meier says. "We understand that next to payroll, workers’ comp is the next biggest expense. And unlike payroll, it can fluctuate dramatically based on frequency and severity of accidents."
Meier and Cox both say workers’ compensation exposure and hazards can be effectively controlled. "We treat our safety program as a vehicle to safeguard our workers as well as our clients’ and our own bottom lines. By assisting our clients in providing a safe work environment, accidents are limited, morale is kept high, downtime is minimized, and workers’ comp costs are effectively managed," says Meier.
Tandem assists clients in safeguarding their employees, managing risks and limiting their workers’ compensation exposure, but Cox notes that employers must take the lead. "Safety programs are only as effective as the management support they receive. Because the client is on-site, they ultimately determine the success or failure of the program by their actions," he says.
"To be effective, we must have a commitment from the client, not just in word, but in practice. Clients with effective safety and risk-management programs in place are our optimum partners, as they understand that safety programming will affect their workers’ comp experience and ultimately their financial performance," Cox adds.
In fact, Tandem, like the workers’ compensation insurance carriers, evaluates risk vs. reward before taking on a new account, assessing each work site for potential exposure and hazards and determining if it can comfortably control these risks. "A key element in our client screening process is determining whether client management is committed to [its] safety program. [Management] must show a high regard for safeguarding the welfare of [its] entire work force," says Cox.