The sixth installment in the Bold Penguin series on The Evolving Risks Of Small Businesses addresses workers’ compensation insurance needs for small commercial customers.
The sixth installment in the Bold Penguin series on The Evolving Risks Of Small Businesses addresses workers’ compensation insurance needs for small commercial customers.
Contributed by Nicole Farley, Vice President of Carrier Operations at Bold Penguin. As VP of Carrier Operations, Farley works to streamline the small commercial quoting experience for agents and small business owners, working closely with several large enterprise partners and carriers to achieve mutual short and long-term goals and objectives.
The Evolving Risks Of Small Businesses is a six-part educational series crafted to help insurance agents navigate the demands of commercial insurance, brought to you by Bold Penguin. Each month, we highlight a new timely topic and discuss the trends and tips of a particular risk to help ensure that business owners’ investments are protected.
June’s focus is workers’ compensation claims, risks, and insurance coverage. The complete Evolving Risks Of Small Businesses 2024 Report is available here.
In this post, we'll explore workers’ compensation (WC) insurance coverage – why it’s important, a few noteworthy industry trends, common misconceptions, and ways agents can help customers navigate it.
Accidents happen. And when accidents happen in the course of employment, workers’ compensation (WC) insurance provides important coverage that can help protect small to medium-sized businesses (SMBs), their owners, their employees, and their reputation in case of workers’ compensation claims. Having an employee out of work for even one day due to a work-related injury or illness can have a significant effect on a business’s ability to operate. With proper WC coverage, valued team members can return to work, teams can build resiliency, and business can be protected.
Workers’ compensation is a type of business insurance that provides cash benefits and/or medical care for workers who are injured or become ill as a direct result of their job. Almost all businesses need workers' compensation insurance to comply with state laws.
During a recent interview with Kevin Doyle, AVP Workers’ Compensation Line Team for Travelers Insurance, he gave a brief overview of the value WC brings to the commercial industry landscape.
“For employers, workers' compensation insurance provides peace of mind. It helps their business avoid expensive civil litigation. It also provides support to injured employees to help them recover and return to work. Specifically, workers compensation insurance helps cover medical expenses and replaces lost pay for employees while they’re out of work, or if they become disabled for an extended time. This includes ongoing care costs and funeral expenses if an employee is hurt, sick, or dies from a work-related illness or injury,” stated Doyle.
The need for WC coverage cannot be overstated, and because of that, in most cases, insurance covering workers’ compensation claims is mandated by the state. Each state has its own WC regulations, and experienced commercial agents can help SMBs navigate what the differing regulations mean for them. Doyle continued, “In most states, workers’ compensation insurance is mandatory if a business has one employee or more, because states want to ensure that employees receive the medical care and compensation needed when they experience a workplace injury. [WC] helps their business avoid expensive civil litigation. It also provides support to injured employees to help them recover and return to work.”
It’s helpful to analyze the currently available data on work-related injuries in order to make more informed decisions about how to proceed with WC risk mitigation. There are several studies and reports that can provide a snapshot into recent workers’ compensation claims trends (they occur more often than many would guess).
Doyle stated, “Injuries at work are more common than you might think. For small businesses, the most common causes of workplace injuries that can lead to workers’ compensation claims are slips, trips and falls, overexertion, being struck by an object, cuts and punctures, and motor vehicle accidents. Small business employees missed an average of 79 days due to workplace injuries.” According to an annual Travelers injury report:
Doyle continued, “Travelers’ data shows that the newest employees are the most vulnerable. In small businesses, 42% of small business workers’ compensation claims were to first-year employees.” See reminders below on how to implement safety training for all employees, especially those new to a customer’s work environment.
Having a personal relationship and authentic conversations with your SMB customers are necessary when helping them navigate WC insurance. When discussing workers’ compensation claims and related coverage needs, the following are a few topics to be sure to include:
As trusted advisors to SMBs, commercial agents need to address any preconceived notions their customers might have about WC coverage. Take the time to address these “myths” and help your clients optimize their comprehensive coverage.
Geneie Andrews, Director of Partnerships at biBERK stated that no business is immune to accidents, even for businesses that one wouldn’t think of as hazardous. WC coverage is an important piece of the safety net puzzle for all SMBs. “In many situations, businesses are compelled by law to obtain and carry workers’ compensation insurance. However, even if not mandated, having workers’ compensation coverage will provide peace of mind to a small business owner who is already juggling many balls when it comes to running their business.”
While accidents do happen, it’s important to take steps to prevent them. Agents can advise their SMB customers to take the time for safety and be proactive in risk management with regular environmental maintenance and clearly marked hazards.
Doyle stated, “Slips, trips and falls are a leading cause of workplace injury, but it’s worth mentioning that there is a common misconception that these injuries are unavoidable. Research shows that these often are caused by wet floors, uneven surfaces, poor lighting, or cluttered walkways.” Injuries due to factors such as those can indeed be avoided. “Safety is more than a set of activities focused on accident prevention. It is a way of thinking about how you work, and it should be at the heart of any successful company.”
Andrews gave a few tips and resources on how to be proactive about risk reductions, advising SMBs to “follow standard safety procedures within your industry and from the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA). Provide training to new employees and refreshers as needed, hold periodic safety-focused meetings, and post safety reminders to help keep safety practices at the top of mind.”
Tips like these are easy to implement and could save SMBs valuable time and resources. They can also help ensure continuity of operations and avoid workers’ compensation claims.
Premiums vary based on state law, size of the business, type of business, and the risks of the job. There are simple steps an SMB can take to mitigate losses and have a positive effect on the premium for workers’ compensation claims. For example, a documented return-to-work program can make a positive financial impact, especially when operating in “high hazard” industries.
Insurance carriers are mandated by law to conduct periodic workers’ compensation premium audits to ensure the estimated premium established upon initial binding of the policy is still accurate. Agents can help customers prepare for this so the audit goes as planned without delays.
Doyle advised stressing to customers that “if the audit is not completed, SMBs may face increased premium charges or noncompliance fees.” Agents can help the business avoid these additional costs of workers’ compensation claims with some quick customer conversations.
Doyle gave additional insight on steps to make the audit process easier and more efficient. “First, SMBs can work closely with their agent to identify the correct worker classifications to avoid discrepancies. It also helps to keep good payroll records and to document the dates of hire for subcontractors. Along with that record, it’s a good idea to have a file of subcontractor certificates of insurance.”
Commercial insurance carriers and other partners have great resources to guide SMBs in protecting their investments and reputations. Work with a WC carrier that has the experience, tools, and technology to help navigate the process from quote to bind to claim. They also will have a library of risk management tools like checklists, webinars, and training to share with your customers.
The fact that WC insurance is state-mandated in most cases is a testament to its importance. When discussing business insurance with commercial customers, stress the value it brings in protecting a business, its employees, and its reputation. But also take the time to understand the WC risks that are unique to each business.
Accidents are a fact of life, and workers’ compensation claims can happen anywhere from office settings to “high-hazard” settings, and everywhere in between. Share recent trends in WC claims and address any misconceptions they might have. Helping them navigate WC coverage as well as sharing risk mitigation tips will bolster your role as a partner to their success.
1 All data except where noted is Travelers indemnity claim data, in 2017-21 accident years. Zero-dollar claims excluded. Valued 12/31/2021. Losses are unlimited and undeveloped.
2 All data except where noted is Travelers indemnity claim data, in 2017-21 accident years. Zero-dollar claims excluded. Valued 12/31/2021. Losses are unlimited and undeveloped.
The preceding article is part six of a six-part educational series on navigating commercial insurance, with the purpose of keeping commercial insurance agents abreast of industry trends. The complete Evolving Risks Of Small Businesses 2024 Report is available here.
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