Perhaps a Lack of Awareness, Not Cost Containment, Should Be Employers Biggest Concern

20 Mar, 2012 Bob Wilson


We've all heard the old adage, “An ounce of prevention is worth a pound of cure”. It could be truer nowhere else than in the world of workers' comp, employment risk and workplace safety. A recent employer survey, however, tells me that an ounce of prevention might be pretty hard to come by.

A just released survey of 3,500 employers around the country tells us that 59 percent of them list cost containment as their number one concern, saying they “are very or somewhat concerned about their ability to contain costs this year.  “Zywave's Workers' Compensation Safety Survey” studied businesses within 20 different sectors, with 57 percent of them reporting workers' compensation premiums of less than $50,000 per year.

The survey also reports that “after cost containment, employers expressed notable concerns about increasing exposures (35 percent), renewals (35 percent), and rising fraud behaviors (31 percent). Market availability was a concern of 26 percent of respondents, and just over 20 percent were worried about carrier stability.”

The most telling item to me was the last statistic cited in the source story I read: Of the employers who were experience rated, a whopping 88 percent of them did not know their rating, or were not familiar with the term. In other words, employers concerned about costs, wanting to reduce their exposure, were completely oblivious of the measurement criteria that can actually tell them how well they are doing. Attempting to manage your costs without understanding the measurement criteria is sort of like driving blindfolded – relying on the bumps in the road and the sound of passing car horns to guide your way.

I have written before about the tremendous lack of understanding of workers' comp by those outside the system. Employers and employees alike are generally poorly informed about our industry, and it is an ignorance that can cost them dearly. As this survey indicates, they may speak boldly of cost containment concerns, and talk about safety as a prime preventative, but if they fail to grasp the core data on which to base their efforts, it is a wasted effort that largely amounts to lip service.

The survey reported that 65 percent of respondents “said the most effective measure they took to control workers' comp cost was having a safety-minded culture.” You will get no argument from me on that – but I would emphasize that “having a safety-minded culture” is only effective when a company and its employees are fully informed, and are given clear measurement criteria. To be an experience rated company and not know what that means tells me that the organization is lacking a clear path to recognizable results. It is the Dilbert principle. They talk about safety and cost containment because they've been told it is the right thing to do. They just don't really understand what it means. They have not learned the underlying foundation to what it is they are trying to manage.

The solution for these companies is fairly simple in concept. Talk to your carrier. Talk to your broker. Know your rating, and what it means. Importantly, learn what you must accomplish in order to improve it. That clear end goal will help you set the path to true improvement, and to actual cost containment. After all, an ounce of prevention is worth a pound of cure.

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