Risk Managers' Forum
Reducing the cost of workers comp claims
Success of post-injury claims management depends on communication
By Red Hollingsworth, CIC, CRM
Risk management is divided into five basic principles: identification, analysis, controls, financing, monitoring. The undisputable truth about workers compensation is that through the use of these principles, agents/risk managers can distinguish themselves as dedicated professionals who deserve to be hired because they guide employers to influence claim outcomes and minimize collateral damage.
Let's discuss the role of controls. The objective will be to convey what you can do to help your clients reduce the cost of their work comp claims by an average of 20% to 50%.
Workers compensation seems like an uncomplicated concept to understand from the employer's perspective. They report payroll, pay premiums, and then hope that there are not any accidents or injuries. The dilemma is that for many of our clients it is not a matter of if, but when a work comp claim will happen.
Most employers submit claims thinking their involvement in the claim is finished, assuming that the carrier is going to do what is best for the injured employee and the employer. This philosophy is fine for 70% to 75% of the claims that are submitted. These claims are simple, including minor injuries, such as cut fingers, stitches, and a missed day of work. These employees are honest, hardworking, conscientious, and appreciate their job. Problems occur with the other 25% to 30% of employees who deviously take advantage and milk the process, hoping for a four-week paid vacation. This is now a workers comp problem, but it is also a human resources problem. This happens when the employer does not have a protocol for post-injury claims management, adding $5,000 to $10,000 to the cost of the claim.
The employer already has a relationship with the injured worker, but if the employer fails to maintain consistent contact with the injured worker and the doctor, the employer is giving control of the claim directly to the injured worker. Then, if the worker tells the doctor at the clinic that the employer does not have light duty available, the doctor has no choice but to grant the worker temporary disabled status. The worker is now free to stay at home and watch television, waiting to come across those commercials that serendipitously say, "I contacted XYZ Attorney and they got me more money than I expected."
Carriers are watching their bottom line just like everyone else, with the help of more efficient technology. Their adjusters are overwhelmed and they do not have the time or the resources to adjust claims on a proactive basis. This makes it possible for some employees to milk the system. Claims can stay open and unattended longer than they need to be; reserves frequently are set higher, thus affecting the client's experience modification factor (e-mod). The goal should be to have employers actively involved in the claims process, and adjusters receiving any supplementary information that is necessary. Carriers should know that there are people with a vested interest watching the claim—an extra pair of eyes.
Workers compensation is much closer to financing rather than insurance because the e-mod is based on actual cost of claims instead of expected claims. A risk manager presents prospects and clients with projected e-mod statistics using work comp analysis tools. Furthermore, the risk manager shows clients and prospects how a specific claim will affect premiums when applied as part of the e-mod. I prefer Mod-Master work comp risk analysis software to provide attention-getting analysis.
As agents, we would like to be able to provide risk management help at the time it is needed; alas, for workers comp claims in many cases we do not know that a claim has been submitted. The only time we hear about a work comp claim is when it is problematic, like major bodily injury or death.
The critical key to solving these issues is communication.
The carrier, the employer and the agent/risk manager play crucial roles. Without ongoing consistent communication, the employer becomes the loser in the workers compensation sweepstakes. Collaboration by all parties plays a key role in helping the injured worker recover and return to work as quickly as possible.
I use COMPMinder, a workers compensation software that allows my employers to report their claims on our agency's Web site. When a claim is submitted, the carrier, employer, and agent/risk manager all receive a copy of the first injury report.
Once the claim is submitted, the software will automatically send a request to update the claim. The employer is requested to contact the injured employee and doctor to let them know that light duty is available. When updates are completed, the employer's upper management, adjuster, and agent/risk manager are notified. Documentation is then available to view as needed. The employer completes the next updates at 24 and 72 hours, then 7 days after the claim is submitted. The employer will continue to receive update requests on a weekly basis until the injured employee has returned to work for full duty.
A win-win-win scenario
Using this practice approach results in a win for the carrier, the employer and the agent. The carrier's adjuster now has an employer who is actively involved in the claims process, posing answers to such questions as:
• Has the employee returned to work?
• Are there any red flags that need attention?
• Does the employee feel he or she is getting better?
• How does the employee rate the doctor's care and the carrier?
Employers now have a protocol for post injury claims management. It is a simple and effective way for my clients to submit, monitor, and follow up on claims. Now upper management has a way to track and monitor the claim process. Supervisors get ongoing and regular reminders to stay in touch with the injured employee, emphasizing that the injured employee is a valued part of the organization.
Agents and risk managers now look like rock stars because they can provide help and advice at the time it is needed. We have a fresh set of eyes to review the details of the claim submission, we are aware of updates, and we learn of any changes to the situation as it happens during the claim. The important part of this process is that the agent provides claims and risk management advice in the timely manner that satisfies and assures the client.
Using this software and following these key points, I have a client who has cut the cost of their claims from $300,000 a year to $120,000, moving their e-mod from 1.55 to 1.02 in just two years.
Red Hollingsworth, CIC, CRM, PWCA, has been a licensed insurance agent since 1978. He has been a producer with The Bucker Company in Salt Lake City, Utah, since 2000. He is currently a faculty member for the National Alliance for Insurance Education & Research, for whom he teaches continuing education insurance classes for other agents. For more information on the CIC and CRM (Certified Risk Manager) programs, go to: www.TheNationalAlliance.com.