How to Lower Workers' Compensation Costs

From AmTrust Financial:

Businesses with safe workplaces could see an experience modifier that is better than average and pay less for their workers' comp premiums – while also protecting their employees. Companies wondering how to lower workers' compensation costs can follow the recommendations in this article.

How to Save Money on Workers' Compensation Insurance with Workplace Safety Programs

The Occupational Safety and Health Administration (OSHA) found that "workplace injuries and illnesses have a major impact on an employer's bottom line. It's estimated that employers pay almost $1 billion per week for direct workers' compensation costs alone." While the good news is that there has been a reduction in the number of workplace accidents overall, the cost of workers' compensation claims is remains high.

Companies create workplace safety programs as a way to invest in their employee's safety while at the same time improving well-bding and productivity. Devoting resources to these safety programs helps reduce losses from preventable accidents, so they are seen as an investment for the health of the company.

Workplace Safety and Workers' Compensation Rates

Workers' compensation insurance protects a business and its employees should an injury on the job occur. These benefits can address medical care and related medical costs, retraining, lost wages until the employee can return to work or compensation for permanent disability.

The frequency and severity of workplace injuries are strongly correlated to a small business's workers' compensation insurance costs. Insurance Business shared that the relationship goes further, adding the "severity of workers' compensation claims that an organization experiences, their premiums and their commitment to safety is a very direct one."

How Much Does Workers' Compensation Cost?

The average cost of workers' compensation coverage depends on a variety of factors. The number of employees, the specific occupation and the rate classification of the business all plays a role. Plus, occupations with higher risk will be more expensive to insure than occupations with minimal risk. However, having a policy in place can save businesses significant money in the long run, making it easier to manage profits and losses by reducing out-of-pocket financial liability in the event of an employee injury.

The experience modifier connects the association between loss history and workers' comp premiums in the insurance industry. Businesses with safe workplaces could see an experience modifier that is better than average and pay less for their workers' comp premiums.

Tips to Lower Workers' Comp Rates

OSHA has recommended practices for safety and health programs for businesses of all sizes, which can be customized to an organization's specific needs. Companies can follow these recommendations to reduce their workers' compensation insurance costs:

Assess workplace hazards: Create a process to identify potential risks in your office, shop or work site. Have your insurer, local chapter of the National Safety Council, OSHA, etc., visit your location to point out the hazards. Employees should also be encouraged to recognize and report any dangers or near-miss accidents.
Create a safety program: Implement a written safety program that has the full support of management and top leaders down to the employees.
Communicate with staff: Explain the workplace safety program clearly to employees and involve them in the implementation and day-to-day processes. Hold everyone in the workplace accountable for his or her actions.
Investigate every workplace incident: Every type of workplace incident needs to be investigated no matter the size or injury type. The investigations will give insights into which safety processes are not working or need to be updated to prevent future accidents.

Importance of Workplace Safety Programs

Investment in workplace safety programs helps reduce on-the-job injuries and illnesses and brings savings in workers' comp and other medical costs. Organizations often benefit from larger financial savings over the long run. OSHA shows that employers who establish employee safety programs can reduce costs related to injury and workplace illness by up to 40%.

Employers that enforce safety procedures and regulations, provide safety training, education and occupational health programs create a workplace environment in which employees feel safe coming to work and create an environment of employee loyalty. The financial return on investment (ROI) of these types of safety programs are revealed in increased productivity, improved customer service, savings from fewer injuries and lower workers' compensation costs – though these savings may take time to realize.