Financial Impact of Work Related Injuries

Financial Impact of Work-Related Injuries

Presented by: The Murphy Insurance Group

Today’s Agenda

Promoting Safety

OSHA Penalties

Uninsured Cost of Loss

Experience Modification Factor

Workers’ Compensation Pricing Programs

Summary – Your Return on Investment

Promoting Safety

Top 5 Goals of Promoting Safety

1. Bring safety out of the back room and into the boardroom.

2. Change employee health and safety from reactive to proactive

by establishing a safety culture.

3. Make safety an enterprise value, not just a cost center.

4. Remove subjectivity; use objective tools to quantify.

5. Compete successfully for limited budget dollars.

“Minimizing loss is as much improvement as

maximization of profit.” – Louis Allen, Risk Management Expert

Promoting Safety

Traditional Approach

It’s the right thing to do

People are important

Safety improves productivity and quality

We need to consider OSHA regulations and penalties

Workers’ compensation costs have to be controlled

All true statements, but also consider the value of metrics …

Promoting Safety

The Value of Metrics

Through metrics, we are able to make a true business decision regarding safety

What gets measured gets managed

We can successfully quantify safety using the tools presented today, such as using the Safety Budget Worksheet

Promoting Safety

The Safety Budget Worksheet allows us to develop a reference point for:

– Cost-benefit analysis

– The value of prevention

As we use metrics to support safety initiatives, we still need to be mindful of the ethical importance to protect human beings.

Promoting Safety

Adopt a Safety Philosophy

“Working safely requires solid job knowledge, effective supervision and disciplined, alert work execution. Maintaining this excellence over an extended period of time is the mark of a superior organization. It is more than not getting someone hurt, it is a command of the business you are engaged in.”

Robert C. Olsen

Production Manager, EPMI

Agenda

Promoting Safety

OSHA Penalties



Workers’ Comp Pricing Programs


OSHA’s View on Penalties General Policy. The penalty structure provided under Section 17 of the Act is designed primarily to provide an incentive toward correcting violations voluntarily, not only to the offending employer, but also to other employers who may be guilty of the same infractions of the standards or regulations.

OSHA Penalties

a. While penalties are not designed primarily as punishment for violations, the Congress has made clear its intent that penalty amounts should be sufficient to serve as an effective deterrent to violations. b. Large proposed penalties, therefore, serve the public purpose intended under the Act; criteria guiding approval of such penalties by the Assistant Secretary are based on meeting this public purpose. (See OSHA Instruction CPL 2.80.) c. The penalty structure outlined in this section is designed as a general guideline. The Area Director may deviate from this guideline, if warranted, to achieve the appropriate deterrent effect.

OSHA Penalties

Willful Minimum: $5,000 Maximum: $70,000

Repeated Maximum: $70,000

Serious, other than serious, or other specific violations

Maximum: $7,000

Failure to abate Maximum $7,000 per day for each day violation continues beyond abatement date

Violating posting requirements (failure to post OSHA poster, OSHA 300 Annual summary, citations, etc.)

Maximum: $7,000

Failure to report fatality or catastrophic event within eight hours

Maximum: $7,000

Providing advance notice of inspection $1,000 fine or up to six months in jail or both

OSHA PENALTY SCHEDULE

OSHA Penalties

Gravity-Based Penalties (GBP)

An unadjusted penalty is based on severity and probability. GBP may be reduced due to:

– Good Faith

– Size of Business

– History of Previous Violations

OSHA Penalties

Penalty Adjustment Factors

No adjustment given if any violation is classified as willful

Small business adjustment stops at 250 employees

No adjustments given in the absence of a written safety and health program (could be required under Draft Proposal Safety & Health Program Rule, 29CFR1900.1)

OSHA Penalties

Severe Violators Enforcement Program

Those who willfully and repeatedly endanger workers are charged maximum fines and will receive special attention from OSHA in the way of increased inspections and regulatory controls.

Agenda

Promoting Safety

OSHA Penalties




Summary - Your Return on Investment

Uninsured Property Damage Costs

Uninsured Miscellaneous Costs

Insured Costs

• Medical

• Compensation

• Building Damage

• Tool & Equipment damage

• Product & Material Damage

• Production delays & interruptions

The Real Cost of Accidents Can Be Measured and

Controlled

$1

$4 to $10 • Investigation time

• Cost of hiring and/or training

replacements

• Overtime

• Extra supervisory time

• Clerical time

• Wages not compensated

• Down time

• Negative public image

• Legal fees

• Reduced Employee Morale

The Tip of the Iceberg


Injured Employee: Lewis Laceration DOL ______________

Dispensary Only _________ Outside Medical _________ Lost Time Case _________

WAGES

1. Injured EE time (Not covered by WC) …………………… Rate: $10.00 X Hours: 30 = $300.00

2. Medical visits while on light duty ……………………………..Rate: $10.00 X Hours: 4 = $40.00

3. Decreased productivity while on light duty ………………..Rate: $10.00 X Hours: 20 = $200.00

4. Employee(s) giving aid ………………………………………...Rate: $10.00 X Hours: 3 = $30.00

5. Employees watching, discussing ………………# EE’s: 6 X Rate: $10.00 X Hours: 2 = $120.00

6. Supervisor/Mgr Investigating & Reporting …………………...Rate: $20.00 X Hours: 3 = $60.00

7. Supervisor rescheduling/training ……………………………….Rate: $20.00 X Hours: 2 = $40.00

8. Office: Preparing reports & managing case ………………….Rate: $10.00 X Hours: 1 = $10.00

9. Reactive Safety activities ……………………………………………..Rate: $- X Hours: - = $50.00

10. Overtime required ………………………………# EE’s: 1 X Rate: $10.00 X Hours: 20 = $200.00

11. Other …………………………………………………………………………………………………..$0

SUBTOTAL ………………………………………………………………………………………..$1,050.00

OTHER COSTS

12. Medical Paid by employer ……………………………………………………………………………$-

13. Clean up cost …………………………………………………………………………………….$55.00

14. Transportation Expense………………………………………………………………………...$25.00

15. Production decrease/downtime ………………………………………………………………$150.00

16. Product or equipment loss …………………………………………………………………………...$-

17. Replacement of first aid supplies ………………………………………………………………$10.00

18. OSHA penalties ……………………………………………………………………………………….$-

19. Deductible ……………………………………………………………………………………………..$-

20. Miscellaneous overhead ……………………………………………………………………………..$-

21. Other ……………………………………………………………………………………………………$-

SUBTOTAL…………………………………………………………………………………………$240.00

22. Total Uninsured Cost ……………………………………………………………………..$1,290.00

Uninsured Cost of Loss - Injury example

Employee suffers serious arm laceration four hours into shift:

– Misses work three days

– Two follow-up visits for observation/therapy

– Clinic is about 15 minutes away

– Employee wage rate - $10/hour

– Supervisor wage rate $20/hour

– Back to work on Light Duty restrictions

– Restrictions last for 10 days


Utilizing the Uninsured Cost of Loss worksheet, we can help you identify areas for consideration and improvement.

Agenda

• Promoting Safety

• OSHA Penalties

• Uninsured Cost of Loss

• Experience Modification Factor

• Workers’ Comp Pricing Programs

• Summary – Your Return on Investment


Overview

Benchmark tool used to compare actual losses to expected losses

1.00 is average

– Lower than 1.00 is better than average

– Higher than 1.00 is worse than average

Measures dollars, not number of claims

Based on a rolling three years

Used as a multiplier for premium calculation


Estimating a mod Compare claims for the year dropping off with the year coming on. The estimate

will be skewed if the claims in either year had one very large claim or if payrolls

were significantly different.

2011

Mod - Factor

2010

Claims

$35,238

2009

Claims

$84,472

2008

Claims

$100,393


Financial impacts of controlling the mod:

If the mod is consistently low, there’s a quantifiable financial benefit to keep it from going up.

If the mod is consistently high, there’s a quantifiable financial benefit to bring it down. Potential savings could pay for a safety facilitator.

If the mod has fluctuations, smoothing it out at a lower level would relieve some budgetary frustration.

Agenda

Promoting Safety

OSHA Penalties




Summary - Your Return on Investment

WC Pricing Programs

Workers’ compensation (WC) rates are priced in one

of three ways:

1.Monopolistic states:

• State-run WC programs

2.Price-administered states

• State establishes WC rates

• Dividends payable post-expiration

3.Competitively rated

• Each insurance carrier establishes rates by using

credits or debits

WC Pricing Programs

• Guaranteed cost – most typical

• Dividend plans - state specific

• Retrospective (Retro) plans

• Self-insured – suited for large employers

• Deductible – suited for large employers, varies by state

Agenda

Selling Safety

OSHA Penalties

Uninsured Costs




Summary – Return On Investment

By focusing on the following:

OSHA compliance

Managing uninsured costs through safety initiatives

Controlling your experience modification through a proper safety program

Building a Safety Culture

You will be able to obtain the most attractive WC pricing program, resulting in a bottom-line return on your investment!

The bottom line?

Savings!

Summary – Return on Investment

We have the loss control experience and programs to help you manage and

reduce the financial impact of work-related injuries.

The Murphy Insurance Group

Financial Impact of Work Related Injuries

Business

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