Workers ' compensation insurance - what employers should know

All U.S. employers, with very limited exceptions, are required to purchase Workers' Compensation insurance. This state-regulated insurance provides state mandated medical and lost wage benefits to employees injured during the course and scope of their employment.?? Exceptions to purchasing this mandatory insurance include very small companies that do not meet the number of employees requirement, or in some cases, very large companies that prefer to self-insure this risk. An employer's failure to comply with a state's requirements will trigger economic penalties and possible criminal prosecution.? A variety of Workers' Compensation insurance programs are available from the employer's risk finance perspective.

Exclusive Remedy & Employers' Liability
Although each state's regulations differ, they all share a common purpose. They provide an "exclusive remedy" in the form of a "no-fault" program for compensating employees in the form of medical benefits and lost wages in connection with injuries that arise in the course and scope of their employment. While Workers' Compensation insurance responds to the "no-fault" consequences of workplace injury, Employers' Liability insurance, which is typically joined with Workers' Compensation policies, provides coverage for common law claims against the employer by the employee, their family or third-parties, if the claimant or plaintiff can meet the legal standard in their jurisdiction for establishing that the injury was caused by the employer's negligence, gross negligence, recklessness or willful conduct.
The Broad Landscape of Special Funds and State Programs
Many states provide special funds to pay workers' compensation benefits to injured workers employed by companies that failed to purchase insurance. Assigned risk pools or insurers of last resort are also available for employers that commercial insurers consider too risky.
Monopolistic States
There are currently four monopolistic states: Ohio, North Dakota, Washington and Wyoming. Puerto Rico and the U.S. Virgin Islands also operate under a monopolistic structure. These states legislated requirements that Workers' Compensation insurance be provided exclusively by the state's compulsory program. Commercial insurers may not offer Workers' Compensation insurance in those four states, yet at least two of the states do allow limited opportunity for self-insurance for well-capitalized employers.
Competitive State Funds
In contrast to monopolistic state programs, Competitive State Funds are state-owned and operated insurance facilities that compete in the open market with commercial insurers to underwrite Workers' Compensation insurance solely within their respective state.
Arizona, California, Colorado, Hawaii, Idaho, Kentucky, Louisiana, Maine, Maryland, Minnesota, Missouri, Montana, New Mexico, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas, Utah, and West Virginia operate Competitive State Fund programs.
Second or Subsequent Injury Funds
In most states it's illegal for an employer to refuse to hire a prospective employee or terminate an employee if they have previously filed a workers' compensation claim.? To reduce the possibility of this form of discrimination, some states established a Second Injury or Subsequent Injury Fund. The purpose of these funds is to limit an employer's (and their Workers' Compensation insurer's) exposure by reimbursing or covering the Workers' Compensation benefits paid because of an aggravation or recurrence of a previously existing injury. Reimbursement eligibility requires that the injury must result from a qualifying permanent partial pre-existing disability, illness or congenital medical condition that may hinder person from obtaining employment.
Insurance Premium Calculation - The Loss Experience Mod Factor
This is a complex and often misunderstood concept that has a major effect upon a company's Workers' Compensation insurance premiums. On a general level, it is essentially a comparative analysis of your company's Workers' Compensation loss history for the prior three years against companies within the same or similar industries.
The standard Experience Mod, which is explained below, is calculated by the National Council on Compensation Insurance (NCCI). Employees are classified by standard identification codes depending upon their occupation. Depending upon an employer's size and diversity of operations, many classification codes may be involved in the analysis.
Simply stated, the neutral point in the rating curve is 1.0. If a company's Experience Modification Factor ("Mod") is greater than 1.0, the employer is issued a "Debit Mod" meaning the premium will be increased by a certain mathematical factor. Alternatively, if the loss history is better than expected or lower than 1.0, the employer receives a "Credit Mod" factor that will decrease the Workers' Compensation premium.
A Premium Calculation Illustration ?Using a simple example, suppose the employer only has one classification code for all employees, all of whom work in the same state, and the Workers' Compensation expected loss rate or base premium rate (as established by the state in which the company's employees are located) is $3 for every $100 of payroll.
If the employer has a Mod factor of 0.70, the premium will be calculated as 0.70 x $3 = $2.10. This means the employer is paying $2.10 per $100 of payroll, while its competitor peer group, on average, is paying $3 per $100 of payroll.
Assume the annual payroll for this employer is $2 million, the result is the employer would pay $42,000 in premium versus its competitors with a Mod of 1.0 paying $60,000 for the same coverage. Conversely, if the employer in this example had a Mod of 1.5, the premium would be 1.5 x $3= $4.5 per $100 of payroll. Using the same $2 million annual payroll, the employer in this case would pay $90,000 in annual premium while competitors with a 1.0 Mod would be paying $30,000 less for the same coverage. It's easy to appreciate how these Credit or Debit Mods will have a significant impact upon a company's bottom line, particularly as annual payrolls reach significant levels.
Many factors go into the actual calculation of a Mod including the company's loss frequency (number of losses), loss severity (the cost of the losses), and an estimate of losses that are characterized as Incurred But Not Reported (IBNR), meaning expected losses that have not yet materialized into actual workers' compensation claims.
Medical-Only vs. Lost-Time Claims
When calculating an experience Mod, Medical-Only claim reserves are generally factored at about 30% of ultimate value. Lost Time or Indemnity claims are treated very differently. The literature on calculating experience modification factors states that the first $5,000 of a Lost Time claim ultimate reserve is factored in at 100% with discounts applying above $5,000, including a catastrophic claim cap limit. Therefore, the frequency of Lost Time claims is a real driver of adverse experience. If a company has one Lost Time claim valued at $50,000, it will have less of an adverse affect upon the Mod factor than twenty Lost Time claims valued at $2,500 per claim.
The difference between how these two types of claims affect the Mod should be a strong incentive for employers to implement modified duty programs, with particular attention given to getting employees back to work during the mandatory benefit waiting period, whenever possible. This will cause the claim to be reclassified to "Medical Only" thereby reducing the multi-year adverse impact upon the company's Workers' Compensation insurance premiums.
Claim reserve management is critically important as having over-reserved claims will exponentially affect your Mod factor and correspondingly increase your premium. Having under-reserved claims is also no benefit, as the insurer's audit may result in an unexpected assessment and, of course, increased premiums going forward. Periodic reserve evaluation by a qualified professional should ensure that over-reserved cases are negotiated downward to a reasonable level and under-reserved cases are reserved properly.
Loss Prevention
Loss Prevention is the best way to keep insurance premiums in check. The process can take many forms but essentially involves identifying potential areas of work injury risk and applying techniques to eliminate or substantially reduce the risk that an injury will occur.
Identification of potential causes of risk through performance of a workplace risk assessment is the first step. This process includes critical analysis of procedures as well as physical inspection of facilities and work environments, and discussions with operational personnel and key managers.
Once the causes of potential loss have been identified, modifications can be implemented to operational and business practices in order to reduce the associated risks. The assessment process should be performed by qualified consultants, combining qualitative elements and quantitative metrics including specifications of the physical requirements of each function and the associated loss costs.
Findings should be reviewed with key stakeholders. After agreed upon modifications to operational programs and/or safety programs have been implemented, it's important to monitor results and make adjustments to the preventive measures. Periodic re-testing is important to ensure optimal results are consistently achieved as the company develops. This process has unique relevance in an acquisition scenario.
Loss Control
Loss Control is the process of reducing or mitigating the effect of losses once they occur. Similar to loss prevention safety programs, loss control should encompass well-formulated procedures to respond to various loss situations. The most common examples of loss control are obtaining immediate medical attention for injured workers and having a limited duty return to work program. Employers should conduct a post-loss analysis of the factors that precipitated the loss to determine whether modifications to the loss prevention plan are appropriate. Any post-loss control program should include a process for coordinating medical care to ensure that appropriate medical treatment is received timely so as not to exacerbate a condition while managing medical costs to avoid any unnecessary expenses. Additionally, developing a close working relationship with insurers to deal with potentially fraudulent claims, and implementing an early return to work or modified return to work program all factor into keeping losses at their lowest possible level.
OSHA Focuses On Ergonomics
The Occupational Safety & Health Administration ("OSHA") publishes a variety of guidelines on the topic of workplace ergonomics for various industries and jobs. OSHA has announced plans to heighten its enforcement of ergonomics under the General Duty Clause which requires employers to "...keep their workplaces free from recognized serious hazards, including ergonomic hazards."
OSHA Enforcement has stated:

Even if there are no guidelines specific to your industry, as an employer you still have an obligation under the General Duty Clause, Section 5(a)(1) to keep your workplace free from recognized serious hazards, including ergonomic hazards. OSHA will cite employers for ergonomic hazards under the General Duty Clause or issue ergonomic hazard letters where appropriate as part of its overall enforcement program. OSHA encourages employers, where necessary, to implement effective programs or other measures to reduce ergonomic hazards and associated musculo-skeletal disorders ("MSDs"). A great deal of information is currently available from OSHA, NIOSH, and various industry and labor organizations on how to establish an effective ergonomics program, and OSHA urges employers to avail themselves of these resources.

Workers' Compensation costs have a direct bottom line effect upon all enterprises. Managing those costs to the optimally lowest level requires operational risk assessment, planning, education, an effective return to work program, continual evaluation and active management of loss reserves and third party claims administrators. Experienced insurance professionals are an employer's best resource for minimizing the adverse effects of work-related injuries upon profitability.
The author, James J. Ilardi, CPCU, is a Chartered Property and Casualty Underwriter and President of SECURA RISK GROUP, LLC.
SECURA RISK GROUP is an independent commercial insurance brokerage and advisory firm specializing in the evaluation, design and procurement of commercial insurance policies and insurance programs for privately held enterprises, publicly traded companies, non-profit organizations and professional service firms. Licensed by the New York, New Jersey, Connecticut and Michigan Insurance Departments.

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Employers liability insurance

Employers liability insurance or employee liability insurance as it is more sometimes called, is one of the few statutory classes of insurance in the United Kingdom. The employees insurance serves to protect of the policyholder against claims in terms of their legal liability for injury or illness of an employee in the course of their employment. After the employers liability insurance (mandatory) all employers are Act 1969, by law, by employers commits hold liability insurance. There are limited exceptions from this requirement and to include
Non-integrated company employs only include son, daughter, family members such as spouse, grandson
Institutions, companies with limited liability, where the only employee has built more than 50% of equity in the business. (from 28 February 2005)
Public bodies and certain other organisations.
The current legal requirements for the limitation of compensation, the coverage under the directive is not less than ?5 millions. In practice, most insurers offer a limit of ?10 millions as standard, although this can be increased if it is not enough, is perceived by the employer. Employers liability insurance in practice in general employers liability coverage is not available "isolated", i.e., that insurers avoid employer provides for liability on its own cover. It is more usual to covering, in tandem with public liability cover or combined as part of a package of insurance such as commercial insurance, Office insurance or shop insurance be arranged. Employers liability it is claims in the nature of the employer claims that some claims incidents immediately visible, employers and workers, the possibility for claims arise many years after an employee leaves the employer or the employer has in fact stopped trade. This is a feature of claims in respect of occupational diseases.
The ability to correctly identify the right insurer or insurers, at the time, or at the time, which took the violation was the a focus of attention in recent years. In 1999 the employer adopted liability code of practice by many insurers by spring 2011 the employer liability tracing Office (ELTO) collects information from member insurers and keep a database of the employer and the details of their employers liability insurance with the aim of creating a single archive for this information for the future. First, the information on the new database will contain;
All policies taken out or renewed from April 2011
Policies that previously search be traced by the Office
All guidelines in which a new claim is notified
While insurers membership ELTO is not binding the financial services authority has a legal requirement for all insurers in this business in the UK to the release from liability of employee data. A large majority of the insurers have therefore it before "go live" date connected. In the future reference the employer number (ERN) also known as the PAYE number for all employees liability policies must be collected. There are certain classes of employers, which will hold no ERN and they accordingly free will.
Purchase of employer liability insurance
Employers liability insurance is of specialist liability insurance brokers and available from a number of direct insurance companies in the UK. Increasingly, customer quotes and cover from to a wide range of Web sites to receive in addition to the traditional branches from the main road of insurance broker. The premium for employees liability cover based directly on the activities of the employees concerned, and how much, that the work is carried out. The level of data summarized in the years when the insurer a rating system has developed businesses and professions for most, produced instant quotes.

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Employers, products and public liability insurance - if it is required?

In the UK, insurance as far as business is concerned. You have two options. The first option is a policy on the covers, which requires legal, have. The second is these covers with add others who require a reasonable and prudent entrepreneurs.
So, when we talk about liabilities, what is and what is not, a legal requirement?
We must first consider what we mean by "Liability". Think of it as a bit like a finger-pointing. When someone to your car, be them the damage liability. This debt, in legal speak, is that they are caused for the damage or injury to you or your vehicle. Therefore, when you, causing your business of injury, illness, disease or damage which, you shall be responsible.
The three main types of liability insurance, only one of them is a legal requirement. As most of us know in the business, this is liability for employers. The law of the country has legislation in place, which is updated frequently to protect employees since 1968.
You must have it, but only if you have employees. This is where you need to exercise some care and caution. An employee is quite a broad definition. All of the commercial insurance companies in the UK, which offer this coverage have a definition of an employee in their formulations. The definitions are usually very wide. If you are a friend or family member to help a night in the shop when they briefly occupied, they must be covered your cover of EL. It doesn't matter whether they have a contract of employment in the formal wage and salary statement or whether it be paid only for a few hours. You work effectively under your direction and if violated, you can use a claim against you.
This is important, is the claim of an injuries employees against the business. If a directive in is to worry about the cover, is "in step" to protect you. If you have no cover, this does not mean that you don't pay. Your company could face financial ruin, only from the legal and court costs.
The other two covers are products and public. Product liability insurance is on injuries, diseases or disease, the persons or damage, property, products that you specify, the whether you manufacturers or not. Public liability is when you are mentioned, effectively on your business caused by the events. i.e. the plumber, a House, the shop, a wet and smooth floor floods or the IT commissioned, are part of a computer damages third.
These two are not legally required, but you could still face of a civil claim against you. For the total cost of the coverage when compared to the possible claims costs, you are always better off to take out a policy.

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