Leveraging Your Broker/Agent & Insurance Carrier to Reduce Insurance Costs

1. Leveraging Your Broker/Agent & Insurance Carrier to Reduce Insurance Costs Presented by Mary Kay Depperman, CSP

2. Objectives • Answer Your Specific Questions • Choosing an Insurance Broker/Agent • Getting the Best from Insurance Carriers • Components of a World Class Safety Culture • Benefits of being “Best in Class” • WC 101-The Best Opportunity for Cost Containment Through Timely Reporting and Alternative Duty Within 3 Days of Loss

3. Considerations When Choosing Insurance Broker • Location-Local, National, International • Experience in your Business • Referrals • Specialties-P & C, Surety, Benefits, Aviation, International, Financial Services, Executive Protection • Program Choice-Risk vs. Guarantee Cost • Loss Control Staff-OSHA to Best Practices • Claims Advocates-Reserves to proper treatment • Legal Staff-Contract Advice • Input to your CFO or Risk Management

4. Working With Your Insurance Carrier • Be Prepared for the Loss Control Service Visit-Cattle call vs. Single Carrier • Claims Service • Loss Control Services • Use their On Line Services • Communication • Ask for Targeted Assistance for Both Claims and Loss Control • Have Plan to Reduce Losses

5. 15 Specific Safety Practices For Best Safety Culture • Training-Safety meetings & 5 minute Safety Talks • Safety Rules and Enforcement • Employee Safety Observations • Injury and Incident Investigation • Workplace Audits/Inspections to Identify & Correct Unsafe Acts & Conditions • Modified Duty and Return to Work Program • Continual Ergonomic Improvements • Recognition & Communication

6. 15 Specific Safety PracticesContinued • Wellness Program & Stretching Program • Measuring and Benchmarking Safety performance • Hiring for Safety Attitude & Drug Testing • Coaching and Motivating-Feedback • Timeliness Response • Management Lead Safety Organization • Safety Department as a Resource

7. Progressive Traditional SWAMP Rate Your Organizations’ Safety Culture Be Honest! Quiet Transparent Integrated Equal WORLD CLASS 5% 21% Line/Staff Conflict Behaviors Evidence Committees Quick Fix 46% 28% High Insurance Costs Excessive Frequency Severity Poor Employee Relations Much Litigation Statutory Ignorance Are you somewhere in between? 0% Safety Without Any Management Process

8. Benefits of Best Safety Culture Achievement • Reduced Insurance Costs • Healthy & Productive Employees • Good Management & Employee Relationship • Higher Worker Morale • Less Worries From OSHA Visits • Higher Quality & Production

9. Leveraging To Reduce Costs Part 1 • Choose a Good Insurance Broker/Agent • Work Toward Best Safety Culture • Use Loss Control & Claims Consultants • Insurance Broker • Insurance Carrier & On Line Services • Outside Safety Consultants • OSHA www.osha.gov • College Interns

10. Leveraging To Reduce CostsPart 2-WC 101 • Know Your State’s Workers Compensation Plan • Report Claims Promptly to your Insurance Carrier-Hours vs. Days • Identify Alternative Job Duties in Advance • Implement Alternative Duty within 3 Days of Injury • Work with an Occupational Clinic that Knows Your Operations • Use Correct Job Classification Codes

11. Questions???

12. What is Workers Compensation? • No Fault • Pays benefits for accidental injuries and illnesses related to work • Benefits include medical treatment, rehabilitation and income replacement • Income replacement is 2/3 of weekly wage • Three day waiting period

13. Cost Of WC Insurance • Premium is based on loss history • Rate is customized to each employer • Experience modifier compares each employer to their peers • “Mod” calculated from a three year rolling loss average

14. Three Year Rolling Average • 2009 Mod = 2007, 2006, 2005 • 2010 Mod = 2008, 2007, 2006 • 2011 Mod = 2009, 2008, 2007 • A good year stays with you for three years and a bad year stays with you for three years.

15. Cost Of WC Insurance • Class 8810 Clerical = $0.28 • Class 8742 Sales = $0.74 • Class 3227 AL Ware Mfg. = $4.56 • Class 4452 Plastic-Fab. Products = $3.71 • Class 7380 Drivers = $5.34 • Class 9501 Painting = $4.58 • Rates are per $100 of payroll

16. Base Rate $4.56 Mod average 1.0 Final Rate $4.56 Base Rate $4.56 Mod Min 0.51 Final Rate $2.33 Base Rate $4.56 Mod Current 1.32 Final Rate $6.02 Base Rate $4.56 Mod Control 0.82 Final Rate $3.74 Cost of WC InsuranceHow Ex. Mod Affects Costs

17. The Costs RATE “ X” PAYROLL“X”MOD. = $100TOTAL PREMIUM

18. Financial Impact Anatomy of the WC Mod

19. Financial Impact Anatomy of the WC Mod

20. Sales Required • $405,000 of your premium is under your control. • At a 5% margin, additional sales required = $8,100,000 • How much additional product to you have to produce and sell to generate the revenue to pay for premium above the minimum mod?

21. Hidden Cost of Accidents

23. Prompt Reporting • Report within 24 hours • Insurer will contact within 24 hrs. Employee Employer Doctor • Cost containment controls kick in Medical cost containment Return to work efforts

24. Accident Investigation • Express care to injured person • Gather information • Unsafe acts / Unsafe conditions • Who, What, Why, When, Where, How come • Get to root cause(s) of loss

25. Medical Provider Form • Communicates with physician alternative work is available • Give contacts at Employer and Carrier • Asks physician to list any physical limitations • Sets tone for how claim will be handled

26. What is “Alternative Duty”? • Light duty work • Rotated job duties • Temporary in nature • What jobs are available in your operation?

27. What Changed July 1, 1998? • 70% of the dollars paid by the WC carrier on medical only claims is not counted towards experience mod. • Med only means that no wage loss benefits are paid to employee • That means no wage loss more than three days or no wage loss of any kind 7 days after injury

28. Financial Impact - Sample CaseValue of Return to Work • Employee injures their back. Can’t lift more than 10 lbs for 1 week. Earns $500 per week • Alternative Work available Wage benefits paid $ 0 Medicals paid $1,500 Total paid by Ins. Co $1,500 Amount on Exp Mod $ 450 Premium Impact $ 1,203

29. Financial Impact - Sample CaseValue of Return to Work • Employee injures their back. Can’t lift more than 10 lbs for 1 week. Earns $500 per week • No Alternative Work available Wage benefits paid $133.40 ($100 day 4 and 5 x .667) Medicals paid $1,500 TOTAL PAID $1,633.40 Amount on Exp Mod $ 1,633.40 Premium Impact $4,206

30. What does this mean? • Lost time injuries have more impact on mod. • Lost time injuries, as illustrated in the previous example, cost 3 to 4 times more in premium than medical only injuries.

31. Wrap up • Med only means “No Wage Loss” • Pay full wage during light duty work • Find alternative work • Communicate - Be in control • Reduce Insurance Costs