Re-evaluating Workers’ Compensation Premiums Construction firms may have been slow to adapt to the service mentality, but today’s contractors increasingly are incorporating into their own business models the philosophy to business they must solve customer problems and add value to their projects. Builders also are insisting the lawyers, bonding agents, temporary labor agencies and other business partners exhibit the same willingness to search for and implement the business solutions that will make them more efficient and profitable.

Workers’ compensation insurance companies have taken notice and are taking pains to meet those expectations.

We may consider workers’ comp a commodity – intrinsically interchangeable with price the only selling point – much as commercial contractors were perceived not so long ago. But according to Bill Mudge, chief executive officer for CompWest Insurance Company in California, a new marketing strategy is emerging in the insurance industry. It’s a value-added, customer-focused approach contractors would do well to take advantage of.
“The key to winning in workers' compensation today means better alignment with clients on their needs,” Mudge commented at an insurance industry convention in 2007, according to Insurance Journal.com. “To align selling strategies with the times, brokers need to really know what they're selling and position workers' compensation products in a way that's different than other producers making prospect calls, selling just on price,” Mudge said.

In the past, workers’ compensation was sold off-the-rack. Companies chose the package that came the closest to fitting their needs and budget, without much tailoring. Today, insurance agents bill themselves as resources that can relieve some of the headaches associated with running a construction company in 2010. The insurance industry’s new approach means your agent should be willing to go the extra mile to see that your workers’ comp plan company fits your company like Armani.

The Michigan Economic Development Corporation notes that “Any agent should be able to …provide you with an assessment of your needs and insurance products to meet those needs. Also, any insurance agent should provide you with prompt, quality service in the case of a claim…You should expect more than a yearly renewal contact from the agent and work towards building a continuing relationship.”

I would add that if your agent doesn’t meet these minimum standards, it’s time to shop for a new agent. There’s plenty more you can do to get the custom plan and the right price for your workers’ comp insurance.

You can explore group insurance providers, often through construction industry associations such as the Associate Builders and Contractors and Associated General Contractors. The best of these plans offer no joint and several liability to keep your exposure low; group discounts of 10 percent or more over industry standards via the group’s shared risk, usually low administrative costs and selectivity in coverage, and the possibility of dividend revenue for individual and group performance. Many association-based programs also include safety inspections and other risk management benefits.

Reducing the number and severity of workplace accidents, of course, is the best way to lower rates, but carriers also offer discounts to construction companies who demonstrate concern for safety by sponsoring programs such as substance abuse prevention and treatment for employees. Companies with comprehensive and tailored safety programs and procedures also can reap premium discounts.

Still, the nature of construction contains inherent hazards, and accidents will happen, even to the most conscientious employees and on the most tightly run jobsites. Construction firms often manage their workers’ comp risk by liberal use of temporary employees. Interestingly, this strategy pays additional benefits such as creating a leaner, more flexible operation, cutting training costs and speeding up learning curves and mitigating fluctuations in manpower needs.

Generally, client companies using temporary employees pass the insurance risk to the worker “leasing company.”

“To the client company, the temporary workers or ‘temps’ are usually considered independent contractors. To the leasing company, they are actual employees. This demarcation is typically evidenced by the leasing company’s being the one to receive the temps’ time sheets and cut their paychecks,” explains The Journal of Workers Compensation.

Construction companies that have only a few positions that qualify as “dangerous work” writes Deborah J. Myers in Alaska Business Monthly, filling those slots with temporary workers might make fiscal sense, by moving them off the company’s workers’ compensation rolls.

“Temp agencies working with small companies may be able to obtain bigger savings on workers' compensation insurance because of volume. The temp agency may employ many more people and thereby get a price break on the insurance premiums,” Myers writes. Those economies of scale can extend even to larger companies. “[I]f your company is close to having enough employees to raise your workers' compensation insurance rates, by using a handful of temps, you can save on premiums.”

Labels: Commercial, Construction Industry, Industrial

¶ 5:53 AM