Adversarial Relationships: R.I.P.
By TOM JOLLIFF, director of risk management for the workers' compensation line of business for ICW Group Insurance Cos.
Out with the menacing clipboard, in with collaboration and practical solutions.
The days of stone-faced insurance inspectors checking off safety hazards and violations in their clients' workplaces are becoming a relic of the past. In its place are risk management consultants who genuinely partner with their workers' compensation policyholders to reduce risk and insurance claims costs, lower experience modification factors, and save money. For some companies, the savings can be in the hundreds of thousands of dollars.
This approach--collaborative rather than adversarial--benefits the carrier, the client, and the agents and brokers who represent workers' comp carriers. The carrier sees fewer claims, the policyholder can save money over the long term on insurance premiums while increasing productivity, and the independent agents and brokers have a better market to offer their clients.
CREATING A CULTURE OF SAFETY
A culture of safety in an organization is achieved when the owner of the company and top management have 100 percent buy-in to safety. This sets the cultural tone for the management staff, and, ultimately, the entire workforce. It may seem simplistic, but when line employees know that the owner of the company is serious about workplace safety, and that nothing less than a zero-accident attitude is acceptable, then the culture of safety becomes deeply seated in that organization. It becomes a way of living for every employee, supervisor and manager. Any unsafe act or physical condition that threatens the safety of the team is quickly eliminated or mitigated at every level.
Open and regular communication about safety from the top down is the best method for creating and fostering a culture in the workplace where safety is celebrated and recognized as the sign of a great organization. In these organizations you will find employees who talk proudly about the number of days they have gone without an accident, or about their suggestions that made their area/department safer.
To help companies build and manage their own safety programs, carriers often provide risk management tools and resources. For ICW Group Insurance Companies, the tools for its policyholders are found within its Risk Management Rx, or RMRx for short. RMRx Safety Advisor consists of an expansive safety library with more than 1,300 safety-related training topics. The tools also include several risk management applications that help a company's safety director/manager track completed training, certificates of insurance, material safety data sheets and injury trends.
A program in development for the fourth quarter of this year will enable RMRx to be cobranded with our independent agents. In addition to offering RMRx to prospective clients free of charge, having the opportunity to add their agency branding helps reinforce the value they are delivering to their clients.
Our data shows that when carriers work closely with their policy holders to create a true culture of safety, the frequency of claims decreases. With that, the policyholder and carrier incur lower costs and, over time, the client is able to lower its Experience Modification Factor, or simply "X-Mod." The Workers Compensation Insurance Rating Bureau (WCIRB) develops X-Mods for employers who have developed at least $15,700 in premium (per the 2009 Experience Rating Plan), by applying pure premium rates to the total remuneration that would be used in the experience rating calculation.
An X-Mod adjusts an employer's premium to reflect the difference between the employer's loss experience and the average experience that is expected for its classification(s) and size. By lowering its X-Mod the client can, over time, lower the cost of its premium.
FOCUS ON RISK MGMT.
When ICW Group evolved its philosophy and approach to servicing its workers' comp clients, the company changed the name of its loss control department to Risk Management. This helped the safety consultants, who are specialists in their respective industries, see themselves as educators and mentors, rather than insurance inspectors whose only job is to find fault. Their focus became what's right with the customer's business, rather than what's wrong, and their jobs became one of helping the clients manage their risk management program, rather than simply identifying physical hazards.
When a new client comes aboard, a safety consultant or a team of consultants, depending on the size of the company, completes a workplace analysis. It begins with a meeting with the president, CEO or top-level executives, then working with the client's risk/safety manager or managers.
When risks are identified, solutions are developed and implemented. This typically involves safety training and teaching best practices to employees, and it may involve physical improvements in the workplace. The safety consultant also ensures that the client has safety features in place and complies with all applicable safety regulations.
We are also starting to use actuarial data to develop predictive loss metrics for the workplace. With this data, we will know what to expect in terms of claims frequency in a given industry. Armed with this information, our consultants will be better educated about the risk, and the client's safety person will be able to monitor and anticipate problems in the workplace. This is another facet of the client-carrier partnership and the safety consultants' education and mentoring role.
A PARTNERSHIP APPROACH
ICW Group's shift from a loss control perspective to a collaborative risk management one has been very successful. First and foremost, we continue to hear positive feedback from policy holders.
"The help we received with our Risk Management program is far above what a client would expect from an insurance company," said Matthew Marsh, president of First Class Vending Inc. "We feel as if we are partners when it comes to claimsand risk management."
Our approach has also helped us outpace the industry in terms of claims frequency reduction. This has enabled many of our policy holders to save substantial sums of money. In one instance, when a manufacturer arrived at ICW Group in 2005, it had a $1 million yearly premium for its workers' comp policy due to an average of 44 claims a year and an X-Mod of 131 percent.
After implementing our risk management program, the number of claims began to decline. By 2009, the manufacturer's claims had decreased to 20 a year and its X-Mod went to 93 percent.
The annual premium dropped to $432,000, and 38 percent of the decline was attributed to the X-Mod reduction, saving the client more than $500,000 a year, while productivity increased proportionally. Yearly premium savings of this magnitude can, and should, outweigh initial premium price issues or concerns.
While I do not claim that every company will achieve such dramatic results, this case illustrates the cost-savings potential for taking a forward-thinking, innovative approach to risk management, where the carrier and client become partners and work hand-in-hand to create a true culture of safety in the workplace.
December 1, 2009
Copyright 2009© LRP Publications