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By JENNIFER TOMILIN, senior vice president and technical underwriting officer for Zurich North America's Commercial Markets business unit

One of the ways this can be achieved is by reducing worker's compensation claims. Understanding the components to a workers' compensation claim, as well as knowing what drives workers' compensation losses, are two important ways that can help reduce losses.

There are two cost components of a workers' compensation claim: direct--cost for insurance and deductibles and indirect--cost incurred due to loss of employee productivity, hiring of temporary workers, and/or training new hires.

It is important for businesses to identify where, when and how workers are injured in order to focus their prevention efforts towards correcting the issues that cause the injuries. Once the trends are identified and corrected, employers' direct and indirect workers' compensation costs will most likely be reduced.

One way to identify a business' loss trends is to work with an insurance provider who offers detailed analytical reports created specifically for the business. This information will help identify the business' strengths and weaknesses.

Zurich offers its customers a complete review of their WC claims by modeling the customers claims data and providing the trends and outcomes in a 'Workers' Compensation Diagnostic Report.' This process allows our customers to see a comprehensive picture of their WC claims history to help them pinpoint issues that could be driving up both their direct and indirect claim costs.

The following are some types of trends identified in a company-specific workers' comp diagnostic report:

--Day of the week when most injures occur.

--Average length of employment of the injured workers.

--Top five injury types.

--Top five injured body parts.

--Lag time between injury and reporting to employer.

It may not be clear at first how receiving this information can help reduce WC costs, but the insurance provider would walk the risk manager through the data to help him/her decode the information.

For example, once the employer has identified the specific day or days of the week when WC injuries occur, the employer can develop loss prevention programs or change the way operations are completed on any specific day. It is helpful to know the distribution of employees by length of employment to understand where to focus training efforts. Understanding the top five injury types and top five injured body parts will help identify where to focus injury prevention efforts and specific safety controls that would help reduce injuries.

Experience has consistently shown that employees that delay reporting an injury tend to have higher claim costs. For example, some companies may notice a trend when employees take one to three days to report a claim versus when they take just one day. This data can show where training or communication improvements on reporting claims may be needed.

An increase in exposure to loss can also be created with a reduction in staff. The increase in exposure can result from retained employees filing WC claims fearing they may be the next to go, or by increased workloads: e.g., double shifts. Having the claim metrics that show the makeup of the workforce, including tenure, and WC claims history details like type of injury, day of the week injured and number of days off work can help manage this increased exposure.

Companies in an effort to reduce costs may also consider reducing safety and loss control measures in the workplace to help address short-term financial crises. A business' choice of short-term cost savings over long-term stability is one of the biggest challenges risk managers may face in the current financial climate.

April 15, 2009

Copyright 2009© LRP Publications