In this final segment on Workers Compensation we will investigate the options you have to conduct an in depth analysis of the accuracy of your own policy.
The first option is for you to learn as much as you can about the detail of each of the components, track down the resources and methods for making corrections and adjustments, etc. In other words, make it a do it yourself project. Do you do ALL of your own car repairs? Do you do your own TAXES? Do you prepare your own FINANCIAL statements? Would you present your own defense or prosecution case in COURT? If the answers are all yes, then you are a good candidate for taking on the project yourself.
Another option is to hire your own paid employee risk manager. Not a bad idea if you can afford the expense of another employee which, with benefits, would likely be a minimum annual cost of $125,000. In fact many very large corporations do have employed risk managers who have the experience and expertise to perform this sort of analysis. You will need to manage the entire hiring process and trust that this person will provide a value of at least their employment package year after year.
Another alternative is an independent consultant who will provide a review on a contingency fee basis. They will only get paid if they save you money, but some of them want as much as 50% of the savings as their fee. Since the other 50% going into your corporate pocket as “found money” this may be attractive. The downside is that there is not continuing oversight to make sure it doesn’t happen again. If you want ongoing services, there will be an hourly rate to be paid which may be as much as $150 per hour for ongoing maintenance work. Even 150 hours at this rate is only $22,500 and significantly less than the cost of a full time employee.
What about working with your current Workers Compensation provider or agent and have them do the work? Whether your current provider is an independent agent or an employee of a direct writing insurance company, they are typically compensated by commissions. Workers Compensation is typically one of the lowest insurance commission policies with many insurance companies only paying 5%. This may not provide an incentive for that current agent or representative if the expected result is decreased premium and therefore even less commission moreover their handling expense may have already been exhausted in their rather small commission. There is also the negative subjective that the incumbent may not be anxious to uncover errors on a policy he or she arranged.
Finally, you could always ask a different insurance company or independent agent to provide you with the service in conjunction with obtaining a competitive quote and make the investigation work part of the process. However, this cannot be done on a shotgun, open bidding approach, so you will have to interview candidates, choose one and then work with them. No matter how thorough your selection research, you may find that the “devil you know is better than the devil you don’t know” if their performance and results are inadequate.
Generally, insurance brokers are well versed on the competitive state of the insurance marketplace but may not be up to date on the inner workings and complexities of the NCCI. Consultants may know all of NCCI’s rules and regulations, but may not be aware that a certain insurance company just restricted their schedule credits, or re-filed higher rates at the NCCI.
Bill Stankevitz is a Senior Vice President of Wine Sergi & Co, LLC of St. Charles, Illinois. He has been an insurance broker, risk manager, underwriter and consultant for 45 years and has been involved with procurement and analysis of workers compensation insurance for companies of all sizes. For any follow up discussion or specific questions, feel free to post to his blog, “Insurance Answers for Business” at www.mysweethaven.com/blog. Contact him at BillS@WineSergi.com.
