By Griff Griffith, CIC, CRM, CPA, Principal, GMGS Risk Management & Insurance Services
After benefiting from several years
of post reform reduced premiums, California business owners are now being
battered by a storm of rapidly rising workers’ compensation rates. On top of a 37% rate increase effective
January 1, 2012, Insurance Commissioner Dave Jones recently approved an
additional 8% mid-year rate increase, effective July 1, 2012. Certainly this 45% increase in workers’
compensation could not come at a more difficult time for many business owners
as we continue fighting to survive one the most difficult economic times this
country has ever known. With such rate
increases and painful economic challenges, how can companies survive such turbulent
times? Is there a proven solution to
help companies rein in costs and increase productivity to stay
competitive?
Fortunately, such drastic rate
increases are not a reality for all business owners. A small population of companies has discovered
that by utilizing a Risk Manager, as opposed to a traditional Insurance Broker,
their company is better protected and even prepared for the work comp tsunamis we
are currently facing. Traditionally, the
term risk manager has been associated only with large corporations that can
afford to employ an in-house risk management professional. Fortunately, this is no longer the case, as
an outside risk manager can act as the “outsourced” risk manager for a wide
range of mid-sized companies. These risk
managers work in tandem with business owners and the insurance companies to
provide a distinct approach to achieving a company’s risk management goals.
The fact is upgrading to a risk
manager brings about significant cost savings because of cost reductions in claims
and insurance premiums. Such a
proposition seems like a no brainer, but how does a company identify a risk
manager from an insurance broker?
Brokers
vs. Risk Managers
Risk managers perform many of the
same duties as traditional insurance brokers, but it is their additional
services and technical strategies that differentiate them. Most insurance brokers will, at a minimum, approach
multiple insurance companies and place coverages on behalf of a business. Some quality brokers use this marketing process
to ensure the business is well insured at a fair price. The proactive broker may also provide additional
service, such as limited claims management. However, if it were possible to secure an even
higher level of service above & beyond that of a proactive broker, with no
increased cost, would it be of interest?
While Risk Managers provide
traditional broker services, including the marketing and placing insurance coverage,
their risk management services extend far beyond the services of a traditional
broker. The focus of an interactive risk
manager is to provide proper risk protection while also enhancing the productivity
and profitability of their clients. When
you hire a risk manager, you are essentially adding a team of professionals to
your management team without putting them on your payroll. The rest of this article discusses some of
the distinguishing services of a risk manager.
It is critical to understand that these are not just service
capabilities, rather hands-on, broadened services your company can expect from
hiring a proven risk manager.
Services
of a Risk Manager
Claim
Prevention
One of the biggest advantages to
hiring a risk manager is the securing of claim prevention strategies and
training. To prevent claims from
occurring, we must educate our employees on how to work as safe as
possible. The first step is having the
risk manager’s safety and loss control specialist review and renovate your
company safety program. The finished program
is an up-to-date, custom safety program for your company and its operations. A risk manager will also help your company
roll out the new safety program and incorporate its content into prepared
company safety meeting topics.
Successful claim prevention is a critical element of effective risk management.
Claims
Management
When you hire a risk manager you can
expect to secure a broader level of claims management and service. The risk manager’s in-house claim management
personnel manage claims on behalf of the employer as well as the employee. From the side of the employer, the risk
manager provides veteran claims specialists who aggressively reduce open claim
reserves and close claims as soon as possible utilizing their technical
experience and finesse to work with claims adjusters. From the side of the employee, the risk
manager helps the injured employee feel that they are truly the company’s most
valuable asset. The employee knows they
will do whatever is necessary to make sure they receive proper medical care and
help them get back to work as quickly as possible. With the help of expert claims management,
you will see notable reductions in your company’s claim frequency and severity.
Reduced
Litigation
Did you know that a work comp attorney
will double the cost of a claim? A true risk
manager teaches every employee that their company, not an insurance company,
ultimately pays the cost of a claim. Employee
perspectives and behaviors change when they understand that the lawyers filing
work comp claims are the only ones that get rich. The other two parties involved, the company
and the employee, are both dramatically hurt by the litigation process. Moreover, most injured employees are not
trying to take advantage of the system and once they know they have an advocate
looking out for their best interest, assisting with questions, and helping them
return to work as soon as possible, they have no reason to approach an
attorney.
Fraud
& Abuse Prevention
Work comp fraud and abuse often
creates the greatest frustration for companies in regards to insurance and most
insurance brokers say there is no solution.
Although risk managers are not going to rehabilitate hardened criminals,
the results show that the majority of employees respond to targeted education
and training. Injured employees are
often not aware they are taking part in the abuse scheme. Doctors and lawyers today are notorious for
exaggerating claims and adding additional “injuries” such as psychiatric
claims, sleep deprivation, or sexual dysfunction. Through education, the employee learns what a
wolf in sheep’s clothing looks like, which helps prevent a lot of unnecessary
claim costs. Moreover, we have seen
numerous cases where our education inspires an employee to come forward and
withdraw an existing workers’ compensation claim upon learning the truth about
workers’ compensation fraud, the legal penalties of committing such felonies,
and the negative financial impact on the company and its employees.
Cal
OSHA Expertise
What happens if Cal OSHA pays you a
visit or has to investigate a serious claim?
A risk manager has an in-house OSHA compliance expert to ensure your
company is in full compliance. Cal OSHA
violations can be very costly to a company’s bottom line as well as their
reputation, and regular inspections of your facility or jobsites by the risk
manager are critical to staying Cal OSHA compliant. A risk manger will help minimize such exposure
so that the company can focus on its business, not fighting or paying OSHA
fines.
Employee Education and Team Building
Would it be
helpful if an employee thought more like an owner or a supervisor? When was the last time a company’s CEO, CFO,
or member of upper management filed a workers’ compensation claim? One of the most important services of a true
risk manager is providing employee training that creates greater employee
understanding, and enhances their morale. Even amongst risk managers, this is a unique
service that only a select few risk managers provide to their clients. It has been proven that once an employee
understands the “why” behind working safe, they catch the vision of working
hard and smart every day. In fact, a
company’s culture is transformed when the employees themselves take ownership
of their safety program, its enforcement and when your employees truly feel
that no amount of profit justifies the loss of a team member.
Improving
Productivity
An interactive risk manager breaks
away from the traditional model of working from the top down within an
organization. The approach of starting
with employees and working up to management has not only secured improved
safety results, but increased productivity.
If you treat your employees like they really are your greatest assets, they
will become your partners in safety and take better care of your customers. We often hear that our unique services
accomplish more than just risk management; business owners even boast that their
employees feel more valued as members of their corporate family as a result of
our training.
Service
Accountability
Providing all these services may
appear like a lofty goal to most brokers, however risk managers create written
service contracts with mutually determined priorities and deadlines so that client
expectations are met. When a company
outsources its risk management, it also deserves to outsource the day-to-day
administration too. In fact, a proven
risk manager should work for one of two potential grades, an “A” or an “F”
because they understand their risk management stewardship and take it seriously. Unlike some big brokers, risk managers create
long-term client relationships based on the services they consistently provide as
opposed to just promise.
The
Bottom Line
Companies working with a risk manager
achieve dramatically lower claim frequency and reduced claim severity. These results clearly lead to bottom-line
financial benefits, including dramatic decreases in long term insurance
premiums. However, immediate premium
costs are also affected as underwriters negotiate the exchange of coverage for premium
and they consider a multitude of factors to arrive at their final rates. We have seen first-hand that companies using a
risk manager secure higher discounts and ultimately lower premiums in exchange
for implementing full service risk management programs. After all, how many insurance brokers have
spent enough face to face training time with their client’s employees that the
employees all know their broker by name?
