by Tim Coomer, Specific Software CEO

My office is filled with portraits of my heroes: astronauts Frank Borman and Buzz Aldrin, Albert Einstein, Abraham Lincoln, Vince Lombardi, and NASA Flight Director Eugene F. Kranz – famous for saying “Failure is not an option.”  Behind my desk is a large framed painting of George Washington kneeling by his horse and praying.  As this collection implies, I love grit, determination, and bold individuals who use hard work and dogged perseverance to make a difference.

I also like good old fashioned motivational speakers, books, seminars, etc., that deliver powerful words of inspiration.  I gravitate to the concept summarized in this quote by Calvin Coolidge:

“Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful people with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan “press on” has solved and always will solve the problems of the human race.”

Being mathematical, I have to point out: at 3 hours per week toward Gladwell's suggested 10,000 hour goal, you'll need to work more than 64 years. At 10 hours per week, slightly over 19 years. At 40 hours per week, less than 5 years!

Although these are all inspirational words and images, it is rare to find any type of hard “evidence” to support my belief that discipline and hard work, actuarially speaking, are highly correlated to success.  That’s why a couple days after Christmas, when all the gifts had been put up and the leftover Santa cookies eaten, I found myself curled up in a comfortable chair by the fireplace eagerly devouring the book Outliers: The Story of Success.

In Outliers, author Malcolm Gladwell does an amazing job of presenting how none of us are singularly talented.  We all have inherited a cultural legacy, enjoyed or endured a series of early life experiences, and perhaps been presented with unique opportunities. Hopefully, we’ve had the presence of mind to seize those opportunities.  Most impressive is  Gladwell’s explanation of how 10,000 hours of activity  – playing music or sports, programming computers, etc. – seems to be a threshold for being an “outlier” – one who is differentiated from the rest of the pack.  He uses both The Beatles and Bill Gates as perfect examples.

Gladwell effectively presents the proof I have been looking for. If 10,000 hours seems overwhelming, take heart: on his blog, Seth Godin suggests the number may be less for some markets. Being mathematical, I have to point out: at 3 hours per week toward this goal, you’ll need to work more than 64 years. At 10 hours per week, slightly over 19 years. At 40 hours per week, less than 5 years!  Regardless of the exact amount of time, the point is to persevere.  Effort correlates surprisingly well with talent (granted, the book is a little deeper than that, but go with me on this).  People who are really good at something have worked very hard at it.  As I plan for 2010, I find this to be exciting, motivating, and, at the same time, convicting.

Chapter one of Outliers describes an experiment in which professors divided violin students at a university level music school into three different potential success groups – let’s just call them high, medium, and low.  After some very in-depth research, the study showed an impressively high correlation between the number of hours the students had played the violin prior to their university enrollment and which group the professors had assigned them to. In other words, talent is a direct result of time!

As you start working your plan for 2010, I know you are thinking about your goals for yourself and your business.  How can you sell more, service better, and perhaps increase your income?  Personally, I am taking a page from Outliers and plan on putting in more time on the key skills I think will help me become a better person, business owner, and pilot.

I hope 2010 is a successful year for you and your agency or business.  We’re developing new training materials this year to help you fine-tune your knowledge and expertise while gaining a real competitive advantage in the areas of experience rating, actuarial services, and implementing strategies to help your employer or your client lower its workers compensation costs.  Don’t believe for a second that you don’t have the “talent” to conquer whatever challenges you see this year.  Hard work and lots of time invested will help you develop the skills necessary to compete effectively in today’s market.  We ‘ll be trying to help you with meaningful information and training related to our products and services.

by Kory Wells with Nick Cunningham

As the year draws to a close and  “best of 2009″ lists permeate the media – best films, songs, books, news stories, and so forth – we’ve decided to make our own contribution with a list of the best new features in our ModMaster software that calculates the workers compensation experience modification rate.

There's a long list of ModMaster enhancements we've implemented this year. Here are some of the best!

We’ve based this list on both our web stats, which give some indication of our most popular features, and on the comments of our tech support staff who talk to and email with ModMaster users every day. Our staff asked to include a few features that were actually introduced in 2008 based on some of our more frequent questions, such as, “What’s the loss limit in my state?”

For the record, we distributed 13 updates to ModMaster this year. All 13 included new expected loss rates and other data from NCCI or other bureaus as it became available, and five of those updates also included software enhancements – from things as minor as expanding the width report fields to accommodate larger estimated premiums to several all-new reports. Of course we mention each of these new features in our update documentation as they are released, but we know you sometimes get busy and might’ve missed one or two. So, without further ado, and working our way to #1, here are the top 10 new features you simply MUST know are available in ModMaster.

10. Enhancements to the Aggregate Loss Sensitivity report

We’ve tweaked the mathematical rounding behind this report so that the premium estimates – which can get very large in some cases – are more consistent from one analysis point to the next. We’ve also added new fields to the report to show the aggregate loss amount, the change in the estimated mod, and the change in the estimated premiums.

9. The ability to import payroll data when you’re on the Payroll form in ModMaster.

As opposed to the import function on our Utilities menu that requires you to import setup, payroll, and loss data, the import button on the toolbar of the Payroll form allows you to import payroll into an existing file. This may be handy in cases where you obtain loss information from one source (such as Zywave) and then want to import payroll from another source. You might also use this function to import only payroll data for the newest policy period after performing a File Utilities/Rollover of an existing mod file.

Learn more about all of our import options

8. The ability to use the up and down arrows on your keyboard to move between fields on nearly all ModMaster forms.

This functionality falls into the “makes life easier” category. While it’s been available on the Payroll and Small Loss pages for some time, we didn’t have it on all of the “spreadsheet” views of the Large Loss page. Now, no matter which spreadsheet view you choose from the toolbar of the Large Loss page, and no matter which type of calculation you are doing (NCCI-type, PA/DE, or NJ), you can quickly move up or down a column of data using the arrows keys, just like you can in a spreadsheet.

View a quick video clip about the spreadsheet views in ModMaster

7.  The ability to view loss limits for each state.

When you have a large or catastrophic loss, perhaps that involves a multiple claim accident, employers liability, or USL & HW (U.S. Longshore and Harbor Workers) often the question arises as to exactly what the loss limit is in the applicable state. Although that information can be derived from some ModMaster reports, now it’s easily available to check BEFORE you enter all of the data for a mod calculation. Simply go into the System Administration menu in ModMaster, then click the “Loss limits” link and specify the desired state to see the state per claim and state multiple claim limitations, plus limits for employers liability, and USL & HW claims.

6. New group and grand totals on the Cause of Loss, Injury Type and Loss Identifier reports

Many of our enhancements are implemented because of a user’s suggestion, and this is one of them. Now you can see the total number of losses that fall into a certain category, the total cost of those losses, and their total impact on the mod.

5. The new WorkCompEdge Proposal report

Even if you’re not using WorkCompEdge, this is a great report to help you analyze and suggest what changes a company needs to make to improve its mod. Learn more about it in this article.

4. Support for New Jersey non-”F” classes.

Ironically enough, these classes are preceded - rather than followed – by a “F” and then a payroll code.  ModMaster now makes a 50% adjustment to the manual rate and excess element factors for the indicated code, per the Longshore and Harbor Workers’ Rule 4a in Part Two, Section 1, Page 8 of the NJ manual.

3. Support for the new 1/1/2010 California loss split.

While of course we always make any changes that we need to in order to generate a correct mod in all of the states ModMaster supports, we’re proud of the timely analysis our actuarial staff performed on this and the related California rate changes. Read our California 1/1/2010 Mod Calculation Change Advisory.

2. The new $1,000 WorkCompEdge “Agency Plus” license option

While it isn’t strictly a software change, this new license option is significant. Our agency users can now boost the power of ModMaster with the extensive training and resources of WorkCompEdge.  Learn more about WorkCompEdge licensing.

1. The new Mod Comparison report

Hands down, this is the big winner for 2009, considering all the excitement and feedback it generated. This report lets you compare 2 different mod files, and based on user feedback, we’ve already enhanced it to include total payroll and an average expected loss rate. Read Comparing Two Workers Compensation Mods.

What’s your favorite feature of ModMaster, or something new that you learned about ModMaster from the blog this year? As always, we love to hear from you. Happy holidays from all our staff, and we’ll see you here on the blog in 2010!

by Kory Wells, WorkCompEdge Blog Editor

Sometimes we think of technology only as an expense, but when it’s well-implemented, it can be an effective time and money saver. Today’s blog features news about a cost-effective work comp webinar at which you can train a room full of people at one low price; Kindle delivery of our blog; and a free newsletter that will bring you more technology tips on a regular basis.

Interested in workers compensation training?

Bill Wilson from the Big "I" Virtual University will be offering a comprehensive experience rating webinar in January.

Better understand – and communicate with others about – the experience rating mod, premium overcharges, expected loss rates, loss runs, and more.  Our friend Bill Wilson, Director of the Big “I” Virtual University (VU), will be offering a Workers Compensation Experience Rating Webinar on January 14, 2010, from 2:00 – 4:00 p.m. EST. We heartily recommend that you check it out (and no, we don’t receive any type of compensation for making that recommendation). Here’s a description of the class from the VU:

What do these numbers have in common: $30,000. $16,000. $23,000. $199,957? They’re all real-life examples of premium overcharges due to workers compensation experience mod errors. In each case, a bidding agent was able to take these accounts away from an existing agent who was not vigilant in monitoring the insured’s mod. In this webinar, Bill Wilson, CPCU, ARM, AIM, AAM, director of the Big I’s Virtual University will show you how to decipher a mod worksheet and explain it to an insured or prospect. You’ll learn what information is needed to monitor, check and project mods, how to calculate a mod from scratch, and how to identify and correct worksheet errors.

More specifically, Bill will explain what experience rating IS and what experience rating is NOT. This is critical to understanding how an insured can have a relatively high mod with what appears to be good loss experience. Through exercises, you’ll be able to determine when an account is eligible for experience rating…and when it’s not (something good to know if the insured has a debit mod). Also examined is the impact of ownership changes on the mod when someone sells a business to a newly created corporation in an attempt to revert to a 1.00 mod.

Using a carpentry contractor as an example, this webinar will identify the sources of information you’ll need to check or calculate mods, from the worksheet to loss runs and audit reports. Then you’ll examine every single entry on a mod worksheet, from Expected Loss Rates to D-Ratios and Weighting to Ballast values. You should then be able to explain these items in a way your insureds can understand.

At that point, another example business will be used to go through a complete exercise of calculating an experience mod from scratch. Following that is a discussion of related issues such as when changes can be made to the mod after policy inception, the impact of loss frequency on a mod, how deductible plans work, the importance of loss control, and an overview of interstate rating.

The webinar will conclude with a comprehensive analysis of a final business where you’ll use loss runs, audit reports, and other information to find multiple errors on their mod worksheet. Included in this webinar is a full PDF workbook (with separate appendix) which has dozens of real-life examples and exercises. All of the errors addressed in this program actually happened to real insureds and you’ll learn how to find and correct them.

For more information or to register, go to https://www1.gotomeeting.com/register/581283377.

Do you use a Kindle (or other ereader)?

A few of you have already noticed and subscribed, but we wanted to point out that the WorkCompEdge blog is now available on the Kindle.  Kindle blogs are fully downloaded onto your Kindle so you can read them even when you’re not wirelessly connected. And, unlike RSS readers which often only provide headlines, blogs on the Kindle give you full text content and images and are updated wirelessly throughout the day. Check out the Kindle edition of the WorkCompEdge Blog on Amazon today. And, if you use a different ereader (or get one for Christmas!) let us know – we’ll certainly investigate making the blog available in other formats.

Technology Tips for Your Insurance Agency

Steve Anderson is our neighbor just down the road in Franklin, TN, but it seems he’s always traveling to a consulting or speaking gig, a conference, or a training event related to insurance and technology.  Steve offers a free weekly technology tip newsletter your agency shouldn’t miss. Just this week, for example, the newsletter talked about lower-cost alternatives to Adobe Acrobat, a tool that’s needed but cost-prohibitive to some smaller agencies. Learn more and sign up at http://steveanderson.com/.

by Jeff Adcock, FCAS, MAAA, Consulting Actuary, SIGMA Actuarial Consulting Group

Editor’s note: This is our final and most detailed article in a series on the 1/1/2010 changes in the California workers compensation experience plan rates and rules. It explains more about the key factors we summarized in our previous post, California 1/1/2010 Mod Calculation Change Advisory.

As you probably know from our previous blog entries, the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) pure premium filing with effective date 1/1/2010 proposed a 22.8% increase in the pure premiums, or filed loss cost benchmarks. In early November, the insurance commissioner rejected the proposed rate increase and ordered no change in the pure premiums overall, although individual class codes did see shifts.

The filing also proposed significant changes to the California Workers Compensation Experience Rating Plan (ERP), primarily driven by recommendations of the Experience Rating Task Force. The insurance commissioner accepted the proposed changes to the ERP, with the caveat that the Expected Loss Rates (ELRs) originally filed should be modified by 1% to maintain the same experience rating off-balance factor of 1.030 that was underlying the 1/1/09 pure premiums.

The following summarize the significant changes to the ERP effective 1/1/2010:

1. Changes/enhancements to the methodology for calculating the ELRs.
2. Use of a single split point of $7,000 to segregate individual claims into primary and excess components, in lieu of the current formula for splitting claims.
3. Changes to the D-Ratios and Credibility Values (“B” and “W” values) to reflect the adoption of a primary/excess split point of $7,000 and to reflect recent frequency and severity trends.
4. Increase in the experience rating eligibility threshold from $15,700 to $16,300 to reflect wage inflation.

The WCIRB states in its executive summary of the filing that “based on the proposed methodology change, the impact should be relatively minor for the overwhelming majority of experience rated employers”. However, based on the several moving parts above and particularly the significant changes in the ELRs for many class codes, it is our opinion that the experience modification factor for more than just a small minority will change. That’s why we believe it is more important than ever to consider in advance the impact these changes will have on a specific client, particularly those that must maintain an experience modification factor below a particular number. Now let’s explore these changes, and the mod trends we’ve seen in our analysis, in more depth.

Changes/Enhancements to the Methodology for Calculating ELRs

The WCIRB recommended changes to the calculation of the ELRs based on

• the final report of the Experience Rating Task Force and
• hindsight studies that showed ELRs for some groups were consistently higher or lower than indicated by actual experience.

The most significant change was using adjustment factors based on and grouped in accordance with the North American Industrial Classification System (NAICS). The following table taken from the WCIRB January 1, 2010 Pure Premium Filing (page B:C-12), shows the impact by NAICS group related only to the change in calculating adjustment factors at the NAICS group level:

Again, the above estimated impacts reflect only the change in the methodology related to the adjustment factors. The ELRs effective 1/1/2010 also changed based on actual loss experience, of course. The individual class codes use between two and five years of policy year data (2002 through 2006) to calculate the indicated limited loss to payroll ratios which are the basis for the ELRs.  For individual class codes, policy year 2006 rolling into the data while an older year rolls off may also have a significant impact.

The table below shows the change from 1/1/2009 to 1/1/2010 in the ELR for the 20 largest class codes by payroll. So for example, for class code 8742, even though the new methodology led to an expected decrease in the ELR of 12.2%, the actual change in the ELR including the impacted of updated experience in the filing, was a decrease of 20.0%.

Change in the ELR for 20 largest class codes in California based on 2006 payroll:

PDF documents listing all class codes and their ELR and D changes, sorted three different ways, are available below

Sorted by Class Code Number

Sorted by Payroll (highest to lowest)

Sorted by Percentage Change in ELR between 1/1/2009 and 1/1/2010

Since most risks have several class codes, the impact on the individual risk will depend on the mix of payroll by class code.  It’s interesting to note that 116 out of 500 class codes, representing almost 50% of the total payroll in the state, have decreases of over 10% in the ELR from 1/1/2009 to 1/1/2010.  96 out of 500 class codes, representing less than 10% of the total payroll in the state, have increases of over 10% in the ELR from 1/1/2009 to 1/1/2010.

Impact of Change to a Primary Split Point of $7,000 per Claim

The ERP effective 1/1/2010 defines the primary loss amount as the actual loss amount capped at $7,000.  Contrast that with the prior method of calculating the primary loss using the formula (9,000 x Total Loss) / (Total Loss + 7,000). A single split limit was recommended to simplify the experience rating formula and to be consistent with the experience rating formula used in other states. While the split limit in most states is $5,000, the limit amount of $7,000 limit was selected to minimize the impact, in total, of the change in formula.  As noted on page B:C-35 of the WCIRB January 1, 2010 Pure Premium Rating Filing, based on the 2006 policy year projection, the D-Ratio for the $7,000 split is 0.203 and the D-Ratio based on the old formula is 0.199.  So the change in the formula had minimal impact on the overall D-Ratios.

Even though the intent of the plan is neutrality in terms of the split of losses between primary and excess, the impact on individual losses varies. The table below summarizes the impact on the actual primary losses included in the experience rating formula for several individual loss amounts.

Change in primary losses for various loss amounts, old vs. new split method

Losses less than $24,500 are included at higher amounts in the primary layer and therefore lead to an increase in the experience mod factor, all else being equal.  Losses greater than $24,500 are included at lower amounts in the primary layer and therefore lead to a decrease in the experience mod factor, all else being equal.

Impact of Changes in the Credibility Values (“B” and “W” Values)

The last significant change to the ERP effective 1/1/2010 is the impact of the updated credibility values – calculated as a function of the Ballast (“B”) and Weighting (“W”) values. The current “B” and “W” values were adopted effective 1/1/1997, so it has been a significant amount of time since those have been updated. In the 13 years in between, claim frequencies have decreased and claim severities have increased.

The decrease in claim frequencies and the increase in claim severities are reflected in the approved “B” and “W” values effective 1/1/2010.  The primary credibility, which is a function of the “B” and “W” values, increased by over 20% for risks with total expected losses (limited to $175,000 each) of between 11,820 and 40,147 during the experience period. Risks with total expected losses (limited to $175,000 each) of greater than 40,147 have primary credibility of 100%.  With the prior “B” and “W” values, a risk needed expected losses of over $1.4 million for full primary credibility.

The higher the primary credibility, the greater the impact of the actual loss experience of the risk. Higher primary credibility will raise the experience mod on a risk with primary losses greater than expected primary losses. Conversely, higher primary credibility will lower the experience mod on a risk with primary losses less than expected.

The excess credibility has decreased on risks with expected losses (limited to $175,000 each) greater than $708,762.

Bottom Line of Impact of Changes to ERP Effective 1/1/2010

1. Change in ELRs – ELRs decreased by 6.4% in total, due to change in methodology and actual experience.  116 out of 500 class codes, representing almost 50% of the total payroll in the state, have decreases of over 10% in the ELR from 1/1/2009 to 1/1/2010.  96 out of 500 class codes, representing less than 10% of the total payroll in the state, have increases of over 10% in the ELR from 1/1/2009 to 1/1/2010.
2. Change in primary loss “split amount” – The move to a fixed amount of $7,000 per claim leads to individual losses less than $24,500 being included at higher amounts in the primary layer and increases the experience mod factors, all else being equal.  Losses greater than $24,500 will be included at lower amounts in the primary layer and therefore decrease the experience mod factors, all else being equal.
3. Change in credibility values (“B” and “W” values) – Credibility factors related to the primary layer have mostly increased, and full primary credibility (i.e. 100% primary credibility) is now given to all risk with total expected losses (limited to $175,000 per claim) of $40,147. This increase in credibility will lower the experience mod for risks with primary loss experience less than expected.  The opposite will occur for risk with primary loss experience greater than expected.

Question: Why did the WCIRB file for a 22.8% increase in pure premiums, but ELRs decreased approximately 6.4%?  Aren’t they related, and shouldn’t the ELRs be increasing in line with proposed pure premiums?

WCIRB filed the 22.8% increase in pure premiums and the decrease in ELRs effective 1/1/2010 at the same time. It should be noted that the ELRs were later adjusted by 1.0% to take into account the impact of the experience rating off-balance.

There are probably a variety of factors at work including:

• the impact of reforms (the 2010 modification factors use 2006 through 2008 which are all post-reform)
• slight differences in indications based on policy year data used in setting the ELRs and the accident year data used in determining the overall pure premium increase
• the future impact of the Ogilvie and Almaraz/Guzman decisions

However, the main reason the indicated change in the ELRs and pure premiums are so different seems to due to the way the insurance commissioner has handled each in the past few rate decisions. While the insurance commissioner has not always approved the increase in the pure premiums proposed by the WCIRB, he has typically approved the changes (most increases) in the ELRs with only minor adjustments due to the impact of changes in the expected off-balance amount.

For example, as of 1/1/2009 the WCIRB filed for a 16.0% increase in pure premiums.  The insurance commissioner approved a 5.0% increase in pure premiums but accepted the ELRs with only a 1% modification based on the off-balance factor change.

Question: Are certain mods more likely to increase as a result of these rate and rule changes?

While there are clearly no hard and fast rules about how a particular mod will change under the new rules, we have observed these trends in our analysis:

• For insureds with a mod above or below 1.00, the new mod formula will increase the gap from 1.00.
• For insureds with a high frequency rate – that is, numerous losses under the 7,000 split point – the new mod formula will increase the mod.
• For insureds with high severity – that is, relatively few losses greater than the 7,000 split point – the new mod formula will show little change.
• The new mod formula will penalize the smaller insureds while having minimal impact on the larger insureds.

We’d love to hear from you. Let us know if your experience and observations with mods under the new California rates and rules coincide with our analysis.

by Kory Wells with Jeff Adcock and Tony King

ModMaster update 09.11, available to our clients on Friday, November 20th, includes support for the California rates and the split calculation change recently approved by the California insurance commissioner, effective 1/1/2010. If you do business in California – whether you use ModMaster or not – you need to be aware of how these changes may affect your or your client’s workers compensation mod.

Our actuaries have been analyzing the data, and it’s going to take us a few more days to get more details in a form to share with you. (Don’t miss our previous post that excerpts the WCIRB summary of changes.) But we wanted to go ahead and alert you to a few key principles that may affect your mod under the new rules:

1. Our actuaries have determined that, on average, expected loss rates (ELRs) have decreased 6.4%. In fact, over 100 payroll codes had ELR decreases of 10% or more. While your results will depend entirely on the mix of payroll codes in your mod, an overall decrease in ELRs means that, if everything else stayed the same in your mod, you would have a good chance for your mod to increase in 2010.

2. An important loss level to keep in mind is $24,500. Under the new primary/excess split method, losses under $24,500 will have a greater primary value than they did under the old method.  Since primary losses affect the mod more than excess losses do, this is another factor that may drive your mod up, especially if you tend to have more smaller losses than very large losses. Losses over $24,500 will generate a lesser primary value than they did under the old method, so if you have only losses over $24,500, this may benefit your mod.

3. The best defense is to be prepared for a mod increase, and a good way to do that is to compute your old mod with the new rates and split method.  In ModMaster, this is easy to do (remember, you must be on update 09.11, code level 091118, or later):

• Select the desired mod file with a 2009 effective date, and note the current mod value. Use the Utilities/Copy feature to make a copy of the file with a new name.
• On the Company Setup page, change the effective date to 1/1/2010. Don’t worry that this isn’t the policy anniversary date, and don’t change any other policy dates or other data.
• Calculate the mod and see what the 2010 value would be.  You may want to look at your favorite ModMaster reports for the 2009 vs. 2010 files side-by-side, but don’t forget that the Mod Comparison report will do a quick comparison for you.

Of course, in the real world, your 2010 mod will have different payroll and loss amounts due to the oldest policy period leaving the experience period and the new policy period coming in. In the real world, there are also a lot of other moving parts to the mod formula aside from the ELRs and the primary/excess split values. Certainly not everyone is going to see a mod increase, and some entities will see a decrease. But our testing and analysis has revealed some cases of attention-getting mod increases.

More details of our analysis are forthcoming now available in the article More Details on the Significance of the 1/1/2010 California Workers Compensation Experience Rating Plan Changes. We’d love to hear from our users how the 2010 changes appear to impact the mod files they run with a 1/1/2010 effective date in ModMaster.

by Kory Wells with Jeff Adcock

The fact that California Insurance Commissioner Poizner has once again rejected an increase in workers compensation pure premium rates (read the November 10th Insurance Journal article California’s Poizner Rejects Workers’ Comp Increase Request, Again) is almost overshadowing the fact that he approved other changes that will interest workers compensation agents and others advising clients in the work comp arena.

As stated in the WCIRB’s November 9th announcement:

The Insurance Commissioner approved amendments to the USRP include changes to the Standard Classification System and the elimination of the requirement of insurers to report social security numbers due to privacy concerns. The approved amendments to the ERP include (a) changes to the eligibility threshold, (b) classification expected loss rates, (c) the split formula used to segregate individual claims into their primary and excess components and (d) the ERP credibility (“B” and “W”) values.

This announcement undoubtedly prompts questions such as:

How will these changes to the California rating plan affect the mod?

Part B of the 2010 Regulatory Filings posted on the WCIRB site goes into the changes and their anticipated impact in great detail.  A brief summary (emphasis ours) lies in this sentence from page B:C-12:

While this methodological enhancement will improve the accuracy of experience modifications, the 2010 experience modifications for some employers will be impacted.

For those of you who are interested in learning more about the anticipated impact on the expected loss rates and the mod, we’ve packaged an excerpt of Part B in pdf form.

The first page (B:C-12) of the excerpt has a chart showing the impact on expected loss rates (not the mod itself) by industry sector that may be of interest. As you can see,  real estate, arts and entertainment, and outside sales are some of the areas where the expected loss rates will change the most, with utilities and construction, education, and administrative also showing fairly significant impacts.

The second page (B:C-36) of the excerpt makes it clear that while the overall statewide average mod is NOT going to change, there will be some variability.  The following pages, Exhibits 2.1 through 2.7, show the expected variation in the mod by size of account as measured by expected losses (Exhibits 2.1 through 2.5) and then by existing mod (Exhibits 2.6 and 2.7).

One of our actuaries, Jeff Adcock, consolidated the exhibit data into this spreadsheet (also available in pdf format) so you can have a one-page overview of the estimated impacts. The interesting thing about the existing mod analysis is how current risks with a mod of over 1.00 have a higher percentage of anticipated increase. Jeff is continuing to study the WCIRB documentation and may provide further analysis here on this blog, as warranted.

When will these changes be available in ModMaster?

The change in the split formula requires a ModMaster programming change. We were already working on this change prior to the commissioner’s approval and now have it in testing. This change – along with the new expected loss rates and B and W values – should be available within a couple of weeks.

In the meantime, if you already have 2010 California mods that you could share with us for testing purposes, we’d certainly appreciate you doing so – contact support for more information.

by Kory Wells, WorkCompEdge Blog Editor

As reported on several news and blog sites in the past several days, OSHA has recently released its preliminary list of top safety violations for 2009.  As stated in the full release on PRNewsWire, which came from the National Safety Council,

The number of top 10 violations has increased almost 30 percent over the same time period in 2008.

“We appreciate our colleagues at OSHA presenting their new violation data to such a receptive audience,” said National Safety Council President and CEO Janet Froetscher. “The sheer number of violations gives us new resolve in raising awareness about the importance of having sound safety procedures.”

So what's up with the 2009 spike in OSHA safety violations? Have layoffs, emotional states, and other fallout from the financial crisis stressed workers to the point of making bad safety decisions? Or have the OSHA inspectors just been especially diligent this year?

So what’s up with this spike in violations? And will this correlate to an actual increase in workers comp claims in 2009, something we suggested might happen when the global financial meltdown occurred? We’re not saying we told you so…we’re wondering along with you what’s going on. Have layoffs, emotional states, and other fallout from the financial crisis stressed workers to the point of making bad safety decisions? Or have the OSHA inspectors just been especially diligent this year? Regardless of the cause, as Ms. Froestscher points out, clearly there’s a need to mitigate this trend.

So, this is a good time to remind you of the WorkCompEdge Safety Training Center, which allows each of a company’s employees to take web-based video courses on desired subjects, answer a quiz at the end of each course, and, if he or she earns a passing grade, receive a certificate of completion for that subject. With over 40 videos on a diverse set of safety topics, including defensive driving, disaster planning, hazard communication, noise and hearing protection, recordkeeping, and more, it’s sure to have something for everyone – and addresses much of the top 10 list of violations. Here’s the list, along with the related video(s):

1. Scaffolding – 9,093 violations
Scaffold accidents most often result from the planking or support giving way, or from the employee slipping or being struck by a falling object.

See the WorkCompEdge Safety Training Center video Scaffolds in Construction

2. Fall Protection – 6,771 violations
Any time a worker is at a height of four feet or more, the worker is at risk and needs to be protected. Fall protection must be provided at four feet in general industry, five feet in maritime, and six feet in construction.

See the WorkCompEdge Safety Training Center video Fall Protection in Construction

3. Hazard Communication – 6,378 violations
Chemical manufacturers and importers are required to evaluate the hazards of the chemicals they produce or import and prepare labels and safety data sheets to convey the hazard information to their downstream customers.

See the WorkCompEdge Safety Training Center video Hazard Communication. Note that there’s a separate Hazard Communication for Healthcare Workers video.

4. Respiratory Protection – 3,803 violations
Respirators protect workers against insufficient oxygen environments, harmful dusts, fogs, smokes, mists, gases, vapors, and sprays. These hazards may cause cancer, lung impairment, other diseases, or death.

See the WorkCompEdge Safety Training Center video Respiratory Protection

5. Lockout-Tag out – 3,321 violations
“Lockout-Tag out” refers to specific practices and procedures to safeguard employees from the unexpected start up of machinery and equipment, or the release of hazardous energy during service or maintenance activities.

See the WorkCompEdge Safety Training Center video Lockout-Tagout – Authorized Employee

6. Electrical (Wiring) – 3,079 violations
Working with electricity can be dangerous. Engineers, electricians, and other professionals work with electricity directly, including working on overhead lines, cable harnesses, and circuit assemblies. Others, such as office workers and sales people, work with electricity indirectly and may also be exposed to electrical hazards.

This violation is in part addressed in the WorkCompEdge Safety Training Center videos Electrical Safety – Unqualified Worker and Arc Flash Safety

7. Ladders – 3,072 violations
Occupational fatalities caused by falls remain a serious public health problem. The U.S. Department of Labor (DOL) lists falls as one of the leading causes of traumatic occupational death, accounting for 8% of all occupational fatalities from trauma.

See the WorkCompEdge Safety Training Center videos Slips, Trips, and Falls and Fall Protection in Construction

8. Powered Industrial Trucks – 2,993 violations
Each year, tens of thousands of injuries related to powered industrial trucks (PIT), or forklifts, occur in U.S. workplaces. Many employees are injured when lift trucks are inadvertently driven off loading docks, lifts fall between docks and an unsecured trailer, they are struck by a lift truck, or when they fall while on elevated pallets and tines.

See the WorkCompEdge Safety Training Center videos Forklift Operator Safety and Introduction to Rough Terrain Forklift Safety

9. Electrical (general) – 2,556 violations
See #6.

10. Machine Guarding – 2,364 violations
Any machine part, function, or process that may cause injury must be safeguarded. When the operation of a machine or accidental contact injures the operator or others in the vicinity, the hazards must be eliminated or controlled.

See the WorkCompEdge Safety Training Center video Machine Guarding

Registration for the Safety Training Center is located in the Download and Online Tools section of the “Four” Safety module of WorkCompEdge. There are several other tools there that may also help improve your company’s safety culture and record, including a safety commitment statement, a safety culture survey, a safety measurement tool, and more.

Let us know what you think about the increase in violations this year, and other ideas for addressing this issue.

by Kory Wells, WorkCompEdge Blog Editor

An Actuarial Advantage helps non-actuaries learn about actuarial topics.

Actuarial consultants and analysts outnumber the software staff here at SIGMA Actuarial and Specific Software, so I’m not looking for trouble – just stating personal experience – when I say that actuaries speak a language the rest of us don’t.  But you probably knew that. Terms like IBNR, loss development, and confidence interval aren’t in the everyday language of most business people, but they’re important concepts that many CEOs, CFOs, risk managers and other professionals need to know. So, as part of our educational outreach to businesses of all types, we’re making our popular booklet, An Actuarial Advantage: Maximizing the Benefit of an Actuarial Analysis, available as a free download through the remainder of 2009.

“Our goal with this booklet was to clear up a lot of misunderstood actuarial topics and to make a variety of risk management professionals more confident in their interactions with actuaries,” says our CEO Tim Coomer, principle author of the book.

Originally published in 2005, An Actuarial Advantage functions as a primer for fundamental actuarial methods and topics such as loss forecasting and cash flow analysis. The booklet discusses

• the most effective ways to utilize an actuary for a competitive advantage;
• common challenges that business people encounter when working with actuaries;
• and specific examples of real world applications of actuarial analyses.

It also offers a checklist for working with an actuary.

The booklet, which we’ve distributed to over 30,000 professionals, is recommended for corporate officers, HR staff, risk managers, safety managers, controllers, captive managers, insurance brokers and agency owners, government officials involved with self-insured or captive operations, and anyone else who wants to better understand actuarial terminology and processes. Printed copies of the booklet will continue to be available during the free download promotion for a nominal fee – visit our bookstore to order a printed copy.

Download An Actuarial Advantage now. And be sure to share this offer with your colleagues and clients!

by Kory Wells, WorkCompEdge Blog Editor

Many of our readers have found themselves, at one time or another, in the unfortunate position of trying to explain why the workers compensation mod went up from the previous experience period. The possible culprits are numerous and have a lot of moving parts: changes in

• expected loss rates,
• payroll,
• overall loss experience, or
• the mix of loss types (frequency, severity and/or medical-only losses)

all contribute to a change in the mod. Of course, a change can be positive or negative depending on all the moving parts. Mod increases will occur, even if loss levels remain the same, if expected loss rates fall. Business owners don’t expect to pay more in premium when their business is down, but it’s definitely possible. So how do you get a handle on what exactly is influencing a mod – and premium costs – from one experience period to the next?

We know you already use ModMaster to calculate and analyze the experience mod calculation (What? You don’t? Learn more about ModMaster now), so in the past you would’ve undoubtedly used one of our many reports – perhaps the Loss Analysis by Policy Period, for example – to help see what’s happened with the mod from one rating effective date to the next. Still, that involved selecting the desired mod file and requesting the desired reports, then opening up the mod file for the previous experience period and requesting those reports. So much paper and time and looking back and forth from one page to another.

Find the new Mod Comparison report on the Reports and Graphs page of ModMaster.

But now (drum roll, please), that’s all changed. The new Mod Comparison Report, available in ModMaster update 09.08 and later, produces a two-page report that shows critical information for both the current mod file and a second mod file of your choice. Here’s how to use this report for best results:

1. First, let’s say that you have the 2009 mod for Favorite Client already loaded into ModMaster. You’re ready to put in data for the 2010 mod. Start by doing a File Utilities/Rollover of the Favorite Client 2009 to a new name, let’s say Favorite Client 2010. This deletes the oldest policy year of data (in this case the 2005 policy year) and “scoots” all the other data over on the payroll and small loss pages so that the newest column is empty and awaits your data input.

2. Input payroll and loss data (either estimates or actuals, if you have the data) for the newest policy data into the Favorite Client 2010 file. This would be the 2008 policy period for our example. Also make any other adjustments to existing payroll or losses to match the bureau worksheet.

3. Calculate the mod. If there are no errors, then proceed to the Reports Menu.

4. You’ll see that the Mod Comparison report is now a choice on the Reports Menu. When you click on this report and then click “Print Preview” or “Print Now,” the following dialog appears:

Mod Comparison report dialog

5. Now, here’s the important part: when you pull down the list of mod files, be sure to select the mod file for the same risk but only one year earlier. While ModMaster will attempt to compare any two files you indicate, this report is designed to compare mods that differ by one and only one experience period.  If you try to compare other mods, unpredictable results may occur, as we say in the software business.

6. After you select the mod file to compare to, click the “Run Comparison” button, and something like the following will print or preview. (Click the report image to view the report as a pdf.)

Mod Comparison sample report, page 1

Mod Comparison sample report, page 2

At a glance, you can see how much the mod changed from year to year, but just as importantly, how much the minimum and controllable mods have changed. You can also see what’s happened with the expected and actual losses: whether they’ve gone up or down, and what’s happening with actual to expected ratios.

In this case, we can see that the mod went up, not only because expected losses were down but also because the actual losses which dropped out of the calculation were less than the actual losses which were added for the 2008 policy period.

The new Mod Comparison report is based on a user suggestion we greatly appreciate. We’ve already had a new suggestion from a different user that we should also list payroll totals, not just expected losses. Give the report a try today and let us know what you think!

by Kory Wells, WorkCompEdge Blog Editor

As a follow-up to Michelle Bradley’s recent blog article “A 2009 Collateral Perspective,” we’ve decided to conduct a survey of professionals currently involved in collateral issues related to self-funded workers compensation liabilities.

We invite insurance brokers, risk management consultants, and risk management staff of self-funded concerns to participate in the survey, which will be open through the month of October.

The goal of the survey is to assess, on a national basis, trends in collateral negotiations, exposures, reviews, arbitration, litigation, and other factors that SIGMA has seen with its own clients this year.

Our privacy policy: At the end of the survey, we ask you to register if you’d like us to share survey results directly with you. We’ll also be posting at least some of the survey results on this blog and possibly in other venues. If you supply your email address, we’ll also send you an invitation to join our newsletter list. We will NOT be sending any other emails or contacting you further, nor will we share your personal data with anyone else. Also, no personally identifiable information will be shared in any survey results we publish.

The survey takes about 5 minutes to complete, and (enticement alert) you get not one, but two, special free offers at the end. Take our collateral survey now.

We appreciate your participation!

by Frank Pennachio, WorkCompEdge Regular Contributor

Workers  compensation policy premiums are usually based on estimated payrolls. The final earned premium is determined during a premium audit after the policy expires and is based on actual payroll. When payroll is higher than estimated, the employer owes additional premium, and when payroll is lower than estimated, money is returned. In current economic conditions, many employers’ payrolls are declining, so an employer may be paying higher than necessary monthly installments due to an overstated payroll estimate at the inception of the policy.

In these challenging times where cash flow is king, employers might want to consider another work comp insurance option known as Pay-As-You-Go.

Pay-As-You-Go integrates payroll processing with the payment of workers compensation premiums.  The employer pays their work comp premiums each pay period based on actual payroll.  Also, there are no upfront deposits or down payments.The advantages of Pay-As-You-Go plans include improved cash flow since your workers compensation premiums will be immediately reduced if your payroll declines during any given pay period.  In addition, should you have an upward spike in payroll, you will not be surprised with a significant amount of premium due after the premium audit.

However, to participate in a Pay-As-You-Go program, an employer usually must outsource its payroll processing.  If you have already outsourced payroll processing, you may want to explore whether Pay-As-You-Go is available through your current provider.  If you have been considering outsourcing payroll, but have not yet done so, Pay-As-You-Go may be a tipping point in your decision.

Pay-As-You-Go plans are often touted as alleviating premium audit problems, but it is still critical for the employer to make sure a premium audit is done correctly. While it’s true that you won’t get a surprise with understated or overstated payroll estimates if you’re using a Pay-As-You-Go plan, that doesn’t absolve you from making sure you take all the right steps in providing and verifying information, such as the payroll classes to which your employees belong.  The WorkCompEdge training module “Eliminate Overcharges by Taking Control of the Premium Audit” assists employers with avoiding errors and mistakes in their premium audit.

Pay-As-You-Go plans are available through several insurance companies and payroll processing services.  If you’re interested in exploring this option, your insurance agent will be able to help you connect with providers of this type of program.

Improving cash flow and freeing up capital has likely never been more important for many businesses.  Every little bit helps.  Pay-As-You-Go plans may offer some relief.

Related WorkCompEdge blog articles: Playing by the Rules for Fun and Profit

by Michelle Bradley, SIGMA Actuarial Consulting Group

Interested in collateral issues? Don’t miss our collateral survey.

In October 2006, Lloyd Kelly and I authored a paper titled “Reducing Collateral Uncertainty: A Primer for Negotiations” that was published in Risk Financing Perspectives for the International Risk Management Institute.  We expanded the paper in 2008 and published it as “Reducing Collateral Uncertainty” for the Institute’s Risk Financing Manual.

For the purposes of this article, collateral is one type of security that can be provided to a fronting carrier or regulator by a self-insured entity for the credit risk assumed by the carrier or regulator.

During 2009 and the recent global financial crisis, new trends and challenges have emerged in the area of collateral for self-insured companies. Both fronting insurance carriers and regulators in self-insured states normally require collateral for self-insured programs.

Many situations directly related to overall current economic conditions may affect the collateral requirements for a company. These include factors such as rapidly changing exposures, changes in credit ratings, or financial stability. Insurers face similar challenges with their own financial ratings and stability.

SIGMA has monitored these emerging issues during 2009. The following provides a summary of our perspective as well as recent changes that we believe are important to understanding the current collateral environment.

• The Commonwealth of Massachusetts, Department of Industrial Accidents issued a revised calculation method for self-insured bond requirements. The initial calculation was proposed in March of 2009 and revised again in mid 2009.  SIGMA reviewed the March 2009 revised formula. At that time our opinion was that the formula was conservative and would lead to significant increases in bond requirements for many self-insureds.  The new formula (as of mid year) has not yet been formally released, but preliminary information leads SIGMA to believe that it will be less onerous than the March 2009 formula. SIGMA continues to monitor this situation.

• Several other states continue to require self-insured liabilities to be determined with actuarial methods at pre-determined intervals.  Some states require specific actuarial analysis for self-insureds in “run-off” (meaning the self-insured is no longer with the carrier for which liabilities are being disputed) that request to post collateral below minimum bond or collateral requirements. For example, a state that has minimum bond requirements may consider specified actuarial studies in the support of lowering collateral below the minimum.

• Some self-insured companies have had to replace security instruments with instruments from a new issuing institution at the request of their carrier because the issuing institution no longer had a credit rating or financial strength that was acceptable to the carrier.

• The current financial situation is causing significant changes to the projected 2009 and 2010 exposures for some companies in payroll, revenue, and other factors which can in turn significantly affect the “add on” collateral.  For example, consider the situation where a company’s payroll is anticipated to decrease by 30% following several years of stable payroll and reserves.  Assuming that experience has not deteriorated, the workers compensation collateral for the projected year should decrease.  However, if accurate exposure and loss projections are not made, the “add on” collateral could be overstated. Accurate and well documented exposure projections as well as involved communication are becoming increasingly important.

• We have observed a slight increase in self-insureds considering litigation or mediation to resolve collateral disputes. We observe this primarily in situations of “run-off,” as mentioned above. In such situations it is customary for a self-insured to have both a legal team and actuarial team working to demonstrate that held collateral is unreasonable for the remaining liabilities.

• SIGMA continues to recommend that collateral agreements be reviewed and parameters agreed to on the front end of the policy. We continue to see many insureds that are trying to unwind collateral situations with no contractual verbiage in support of their efforts. In some cases the contractual verbiage so strongly favors a carrier that it is difficult to negotiate collateral reductions even with actuarial support.

SIGMA understands that each relationship between a self-insured, carrier, and regulator (if applicable) is unique.  It is also important to note that the collateral situation for some of our clients has remained stable.  However, for companies with rapidly changing exposures or for companies changing insurance carriers or program structure, collateral issues may require significant attention.

]]> http://workcompedgeblog.com/2009/09/09/a-2009-collateral-perspective/feed/ 2 WorkCompEdge Blog Editor financials podcast http://workcompedgeblog.com/2009/08/18/new-workcompedge-licensing-options/ http://workcompedgeblog.com/2009/08/18/new-workcompedge-licensing-options/#comments Tue, 18 Aug 2009 20:12:53 +0000 WorkCompEdge Blog Editor http://workcompedge.wordpress.com/?p=262 ]]>

by Kory Wells, WorkCompEdge Blog Editor

As you may recall, we launched WorkCompEdge last fall – just in time for the economic crisis. Since the downturn affected many sectors, including insurance and risk management, we’ve been especially grateful to our WorkCompEdge founding members and to all of our ModMaster customers who evaluated WorkCompEdge. Time and again, we’ve heard similar feedback, however, and that’s led us to make some changes to our WorkCompEdge licensing options we think you’ll be excited about. Here are the highlights:

Our new Agency Plus license represents some cool savings over previous WorkCompEdge license options for agencies and similar providers. Thanks for giving us your feedback!

IF YOU ARE AN AGENCY, BROKERAGE, INSURANCE COMPANY, CONSULTANT, PEO, TRUST, ETC.

For only $1,000 per year, the new and very affordable WorkCompEdge Agency Plus license offers agencies and similar providers the opportunity to access WorkCompEdge for internal training and coordination of service activities in 15 different areas that affect work comp costs, including:

* hiring practices,
* safety,
* the premium audit,
* mod verification and analysis,
* medical clinic relationships,
* return-to-work,
* and much more.

As you probably know if you’re a regular reader of this blog, site access includes to-the-point educational modules PLUS strategy and tools to help you evaluate a company’s entire work comp picture.

For an additional $500 per client, you can add the option for your clients to have direct access to WorkCompEdge and the WorkCompEdge Safety Training Center.

The Agency Plus license can be purchased as an add-on to your annual ModMaster subscription, or you can contact us for a prorated license until the time your subscription is due for renewal.

IF YOU ARE INTERESTED IN AN AREA “EXCLUSIVE” LICENSE TO WORKCOMPEDGE

For agencies who are eager for exclusive access to the benefits and competitive advantage of WorkCompEdge, we’ve enhanced the Member Agency Exclusive license to include custom marketing support, flexible employer seats, unique educational opportunities, and more. A number of our founding members have already converted to this license, which is priced at $850 per month. Some markets – including Albuquerque, Atlanta, Buffalo, Shreveport, and parts of Maryland, Minnesota, and Wisconsin – are already closed.

IF YOU’RE AN EMPLOYER

WorkCompEdge is still available through your favorite agent, broker or consultant on terms they specify. It’s also available directly from us for $500 per year.

FAQs

Q: If someone else gets an exclusive license in my area, does that affect my ModMaster subscription?

A: Absolutely not. It only affects your ability to be a registered WorkCompEdge user. You will still be an important ModMaster client, participate in our forthcoming WorkCompWisdom program, and glean valuable knowledge from our blog and other resources.

Q. Exactly what are the fifteen modules in WorkCompEdge?

A. A graphic showing all of the modules is at http://www.specificsoftware.com/wce/videointros.htm. Click on any of the module titles to see the short video introduction to that module. At $1000, we believe you’ll get your money’s worth by using even ONE of these modules!

MORE DETAILS

Learn more about the new WorkCompEdge license options at http://www.specificsoftware.com/wce/pricing.htm

If WorkCompEdge interests you, act soon! To order or inquire further, contact Helene Pellett at 800-929-4052 x 205 or helene_pellett@specificsoftware.com

Connect with our CEO Tim Coomer or blog editor Kory Wells on LinkedIn.

by Kory Wells, WorkCompEdge Blog Editor

We’re grateful that several hundred of our readers and clients took the time to participate in our recent survey “How Do You Stay Informed and Connected?” We’re still compiling the results, but for today, I want to focus on one trend that was glaringly evident: professionals in the insurance industry (which made up 98% of our respondents) are not taking advantage of social media sites like LinkedIn and Twitter. Now, admittedly, Twitter is still pretty new, so it may be understandable that more folks in the insurance industry haven’t yet experimented with it. But LinkedIn? A whopping 85% of our respondents say they’re not using LinkedIn. While we understand that social media may not be for everyone, at least exploring the possibilities – particularly if you are in business-to-business (b2b) sales or service – should be an objective for every business, period. So let’s talk more about LinkedIn today.

Well, yes, a lot of us probably do. But as with other social media, LinkedIn is not about being a substitute for relationships. LinkedIn is about nurturing existing relationships and helping you find new business relationships. It lets you visually see who among your contacts may themselves know a prospect you’ve been wanting to meet. It’s also about helping other people find you!

Here’s one member’s comment from a LinkedIn blog entry

I also was a bit skeptical of LinkedIn at first. When I found out the ways to really use it, however, I discovered that it’s a great way to not only find and get introduced to people through your network for business opportunities, etc., but also a way for the people you DO know to recommend your services which can be viewed by the public.

Every time I meet with a new client or come back from a networking function, I tell them about LinkedIn via email with a brief layman’s overview of what it can do, then follow with an invite to connect. I have received more recommendations this way and also been introduced to several new people who I wouldn’t have gotten the privilege of knowing, had I not been using this service.

Not enough time

If you spend time nurturing relationships through phone calls, emails, lunches, business mixers, centers of influence, and other methods, you really should consider adding LinkedIn to the mix. LinkedIn is not something you have to nurse every day. Yes, you will have to spend a little time building your profile. If you’re not the most tech-savvy person, hopefully someone in your office is, and can help you get started. As an almost immediate benefit, creating a profile will help you and your company get a little more love from the search engines. You can also join groups that discuss topics of interest to you. For all this activity, you can receive a summary on the frequency you choose. I get emails from LinkedIn once a week, and usually check in only once or twice a week. It really doesn’t take that long to scan status updates and group activity to see if there’s anything I want to respond to.

Haven’t seen my clients or prospects using it

First of all, LinkedIn has over 43 million members, so have you really looked for those clients and prospects – and the people you know who can lead you to them? If someone you’d like to connect with truly isn’t on LinkedIn and you have their email address, you can invite them to join – and thereby establish yourself as a leader in the relationship. You can send them a personal message with the invitation, and they’ll immediately see your profile, which helps communicate the professional you are. Obviously, if you have their email address, you can email them directly, but in our own experience here at Specific Software, this is simply a little bit different way to approach people, and it’s often successful.

Security issues or no access from work

I know that some of you work in large corporations that have tight control for different software/network security reasons. I don’t have the expertise to argue for or against such policies. Doing business in the virtual world certainly has its risks. However, if the decision to prohibit access is more of a cultural decision in your corporation, I’d certainly question that. I can understand Facebook and MySpace being off limits in some work environments, but LinkedIn? No way.

Summary

I hope this is enough to pique your interest and give LinkedIn a try – and not for just one day. You need to keep revisiting it for several weeks to get the feel and benefits of it. You can start by connecting with our CEO Tim Coomer at http://www.linkedin.com/pub/timothy-coomer/2/a99/6 or me (Kory Wells) at http://www.linkedin.com/pub/kory-g-wells/3/975/787

Also, here are some other resources that may be helpful for you to get even more ideas and details about using LinkedIn:

Business Week: Why Social Media Is Worth Small Business Owners’ Time

Search Engine Guide: Why LinkedIn is the One Social Network I Couldn’t Work Without

Social Media Guru: Why LinkedIn?

I’ll give you a few weeks to digest this and experiment for yourself. Then it will be time to talk about Twitter!

Listen/subscribe to this blog on the WorkCompEdge podcast feed

You can now follow WorkCompEdge on Twitter!

by Kory Wells, WorkCompEdge Blog Editor

Several years ago, Specific Software conducted a survey about favorite online sources of insurance and risk management news and information. The survey garnered some media attention in the industry and was useful to us internally as we developed marketing and publicity plans.

But that was a few years ago! With the growth of both content and “2.0″ applications on the web, we’ve decided it’s time to resurrect the survey, with a few new questions geared towards not just information, but how you stay connected with colleagues and clients.

Whether you’re an insurance or risk management professional or a business insurance consumer, please take our survey “How Do You Stay Informed and Connected?” now.

While I’m on the topic of staying connected, this is a good time to mention that you can now follow WorkCompEdge on Twitter. I’m trying to tweet at least once a day with some sort of information about workers comp, general insurance and risk management, general business or technology news, or news about Specific Software and SIGMA Actuarial that I hope others may find interesting.

You can use Twitter for free simply through the Twitter website - using your cell phone is optional. I’ve found that starting just by using the web interface is a good, low-impact way to try it out.

In general, the insurance industry doesn’t seem to be embracing social media as quickly as other industries. But numerous activities, such as the recent AMS Users’ Group Social Media Road Trip, Insurance Journal’s promotion of social media webinars, and consultant Rick Morgan’s blog entry “Insurance Agents Don’t Market,” suggests that we are on the cusp of change when it comes to how we connect with each other and our clients.

We’d love to hear your thoughts in our survey – and in the blog comments!

by Jeff Adcock, SIGMA Actuarial Consulting Group

Listen/subscribe to this blog on the WorkCompEdge podcast feed

Editor’s note: In today’s blog, Jeff Adcock, consulting actuary with our affiliate SIGMA Actuarial Consulting Group, shares his analysis of the recent ratemaking change announced by NCCI. Jeff, once an intern at NCCI, contacted NCCI’s Tom Daley directly to confirm his understanding of this change. Thanks to both Tom and Jeff for their insight – and if you’re an employer, scroll on down to the “As-Plain-English-As-We-Can-Get-It Summary!”

by Frank Pennachio, WorkCompEdge Regular Contributor

Today’s blog will be most useful to insurance agencies who are assisting their clients with experience mod verification and analysis, but the main point is important to agents and employers alike: sometimes errors in the mod occur, and these errors can cost the employer money through increased premium costs. Therefore it’s important to go “looking for trouble:” to know how to identify such errors, and how to get them corrected.

by Robert F. Tilley, Jr, SafeTek USA

Listen/subscribe to this blog on the WorkCompEdge podcast feed

Editor’s note: I recently joined the Small Business Online Community sponsored by Bank of America. Among several interesting articles there, I was thrilled to find a safety guy talking about the workers comp mod. Robert F. Tilley, Jr. is the CEO of SafeTek USA, a company that provides knowledge, supplies, products and services to North American organizations ranging from small residential builders to the US Navy. SafeTek’s vision – “to help create safe and healthful workplaces, where quality is higher, mistakes are fewer, and costs are lower” – is quite similar to the mission of WorkCompEdge, and Robert’s article certainly has some points that should sound familiar to our regular readers. But he also brings the perspective of a safety professional and the business owners his company serves – along with some interesting statistics. The following article may give your company’s management, or your clients, some new food for thought.

If you are not motivated to have an effective safety program by either OSHA, the threat of fines or care for your employees, one thing that will motivate you is the actual cost of a workplace injury to your business.

At a recent speaking engagement for business owners addressing how to implement effective safety programs, I had a question from a member of the audience-we’ll call him Bob. Bob asked why he should invest in safety. He told me he has insurance if an employee gets injured, he has a safety manual, OSHA has never bothered him and the only employee injuries so far have been minor. Why should he do more if what he’s doing now is working?

“Well Bob,” I said. “How much will it cost your business if an employee falls from a roof, and how much have those ‘minor injuries’ cost you so far?” Needless to say, Bob, and everyone else in the audience that day, were quite surprised as we revealed the actual costs of workplace injuries to their businesses. Unfortunately, the only thing most employers are aware of is that they have to spend money to have an effective safety program, and that’s where the train stops. Successful companies, however, maintain very effective safety programs and pay the expenses involved even when business is slow and times are tough.

Most employers maintain some semblance of a safety program at their company, either because they care about their employees or because they’re required to by OSHA. OSHA violations can range anywhere from just a warning, to $70,000 per incident with recent proposed legislation asking to raise fines even further into the range of EPA violations. I would like to think that all employers care about their employees, but often profits come first. What does that mean? It means one thing is certain-all employers care about their company because of the profits derived from it. A for-profit business is created to make a profit 99.9 percent of the time. You carry insurance to protect yourself and your business, you plan ahead to avoid unforeseen costs and cut expenses where they are not needed to ensure you are as competitive as possible while maintaining a good profit margin.

Unfortunately, however, the cost of effective safety measures are all too often deemed an “unnecessary” expense. When business is slow, what is the first expense to get to get cut? You already know: the safety program. Normally the responsibility gets transferred to the HR manager, and training and other expenses are cut, which could really lead to disaster, especially for the new employee you just hired. If you are not motivated to have an effective safety program by either OSHA, the threat of fines or care for your employees, one thing that will motivate you is the actual cost of a workplace injury to your business. So how much does it cost?

Statistics and Costs

Every year in the United States there are over 6,000 workplace fatalities. The greatest majority of these fatalities are men ages twenty-five to forty-four, of which there are approximately 30 million in the United States. That means, using this example, just over 1 in every 6,000 men aged twenty-five to forty-four dies at work each year.

Even with these staggering numbers, this does not include deaths related to occupational illness. Another 50,000 workers die every year in the United States from occupational illnesses due to exposure to a workplace hazard. These occupational illnesses include asbestosis caused by exposure to asbestos, silicosis which can be acquired from concrete cutting operations (and any work involving exposure to crystalline silica dust if not using proper respiratory protection) black lung disease for miners, or brown lung disease for textile workers, etc. (Just an FYI, though not usually fatal, poison ivy is an OSHA reportable illness.)

In addition to deaths, there are over 6 million U.S. workers that suffer non-fatal workplace injuries with an estimated cost to U.S. businesses of around $128 billion annually. A person’s life or health is obviously priceless, but incidents and injuries carry a tangible cost to business, one quarter of each dollar of pre-tax corporate profits, to be exact.

The actual cost of a workplace accident or illness to your organization depends on a few different things. Costs depend on how many employees you have, how many incidents you have, the type of work you do and the value of your materials, products or services. For companies that may be experiencing a tough time financially, any losses are serious. Even for a large employer, losing an employee on a job who is skilled in their trade, for even a few days, can have a much larger impact on profits than the actual direct costs might suggest. With smaller businesses this would be magnified because they often have very little buffer when it comes to accidental losses. A serious incident could not just make it difficult to get by, but put them out of business. In fact, according to a recent study, 60 percent of companies experiencing a serious disruption that lasted more than nine days went out of business.

“But Wait, What about My Insurance? Isn’t My Business Covered?”

Insurance only covers what is detailed in the policy, and it usually only pays for serious injuries or damage. Workers’ compensation does cover all employee injuries, but you will end up paying for the cost of that injury and more-we’ll get into that later. Some of the costs that are not covered by insurance include lost time, sick pay, damage or loss of product and materials, lost time and failure to keep schedule, extra wages for overtime and temporary labor, investigation time and expenses, OSHA fines, loss of contracts, legal costs and loss of company reputation, to name a few.

The uninsured costs differ between businesses, the type of work being done, insurance and type injury. No matter how you look at it, though, the uninsured costs are many times greater than the insured costs. If your business is a ship, costs are like an iceberg. Most of the costs are hidden beneath the surface and are not immediately visible, but you feel it when you run into them. Studies have shown that the insurance premium to uninsured cost ratios for the construction industry generally range from 1:9 to 1:41. That means that for every $1 paid in insurance premiums, the company has to pay an additional $9 to $41 themselves for losses arising from incidents. Another way to look at it-uninsurable expenses often run up to as much as 4 times more than the actual costs covered by insurance.

Workers’ Compensation Insurance

It may surprise even the financially savvy how much you can save on your insurance by being safe. A poor claims record will affect the amount a company pays in insurance premiums. Depending on the number of incidents a company may have, insurance premiums can increase, and coverage may even be cancelled. Insurance companies set a base rate for a particular industry, and the number of incidents you have directly affects how much you pay as your base rate. This is called an experience modifier. Your workers’ compensation insurance premium is determined by this easy formula:

Payroll x Workers’ Compensation Rate x Experience Modifier

Workers’ compensation rates reflect the average claim cost per $100 of payroll. Workers’ compensation rates can take a huge chunk out of your profits if you are not safe. The average worker’s compensation rate for construction is 7 to 8 percent of your payroll, but can be lower for executives, around 2 percent, or 25 percent for more high risk activities. According to the U.S. Census Bureau, construction claims comprise around 21 percent of the total claims for all industries. This is quite a large number considering that only 5.7 percent of the U.S. workforce is in the construction industry.

An experience modifier of 1.0 means your company’s workers’ compensation claims experience is no better or worse than your industry. If you have a lower experience modifier, you pay less.

For example, if your business had a 1.47 experience modifier because of increased incidents and injuries and paid $85,958 in premiums, but reorganized, got serious about safety, and got down to a .82 experience modifier, your business would only be paying $47,950. That is almost a $40,000 savings. That $40,000 with a 9 percent profit margin equates to approximately $445,000 in new business each year!

There are other savings to be had. Many businesses find that by improving workplace safety and health standards, their investments are repaid by improved productivity and efficiency, less employee absence, good company reputation, less turnover and improved quality of work. Tackling the causes of incidents and injuries is not unnecessary overhead, but an investment in your business. An investment in an effective health and safety program is as valuable as any other for your company. The American Society of Safety Engineers found in a recent study that for every dollar spent on a quality safety and health program, businesses saved $8. That’s a healthy return on investment.

An investment into an effective safety and health program for your business is just that, an investment. Not only is it unethical to risk an employee’s health or safety to save money and cut costs, but in reality, it does just the opposite. It creates unnecessary risks, costs and headaches. A safe company with limited incidents and injuries will not only have an increased profit margin, but will be more appealing to potential clients and good employees. Successful businesses plan for the future, for growth and for potential risks. Safety should play a key role in your strategy and is the reason long-term successful businesses invest so much into their safety and health programs, because as I am sure some of you know, gambling isn’t a good long term, or short term investment. Play it safe with safety. You may skimp by for a while, but the house always wins.

Listen/subscribe to this blog on the WorkCompEdge podcast feed

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by Kory Wells, WorkCompEdge Blog Editor

Maybe you’re in an agency that’s considering WorkCompEdge. Or maybe you’re already an agency member. Integrating WorkCompEdge into your sales and service processes is admittedly a task that takes some thought and – that dreaded word – change. WorkCompEdge member Garry Watts of the Winona Agency acknowledges it isn’t easy. “I’m a producer,” he says, “and we don’t think ‘process-oriented.’” But, in a new audio interview available here on our corporate websiteand as a podcast feed, Garry also goes on to offer encouragement for – and his experience with – implementing WorkCompEdge.

Today’s blog marks the first time we’ve published the blog as a podcast. Would you like all WorkCompEdge blog entries delivered as a podcast? Let us know!

“WorkCompEdge seemed to be a missing link for us,” he says. “We think the return on investment is very high.”

WorkCompEdge contributor Frank Pennachio, another agency owner and work comp trainer, also lends his thoughts on how WorkCompEdge helps agents lead and engage employers and how various work comp training programs integrate with WorkCompEdge.

(For our Member Agencies, Frank and Garry will be continuing this discussion in more depth in a web-enabled roundtable discussion in July – watch your inbox for more details.)

Thanks to Jack Burke, president of Sound Marketing and host of the popular insurance programs “Audio Insurance Outlook” and “Insurance Talk Radio,” for conducting the interview.

For you podcast subscribers out there, this blog marks the first time we’ve pushed audio to a podcast feed. Be sure to subscribe, and let us know if you’d like all blogs available as a podcast! It won’t always be Jack’s professional voice, but we’re willing to give it a try if the interest is there!

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by Kory Wells, WorkCompEdge Blog Editor

Workers compensation consultant, writer and trainer Margaret Spence of Douglas Claims and Risk Consultants has founded National Return to Work Week and is observing it now (May 11-15, 2009) for the first time with a free virtual conference. Here are a few of the seminar topics coming up in the remainder of the week:

• Physician Where Art Thou – Medical Management
• Best Practices – Workers Compensation and Beyond – From a Defense Attorney’s Point of View
• I’m Injured and I Can’t Come Back to Work
• Engaging Employees With Disabilities – Getting Them Back to Work

“Kory,” you might say, “it’s a whole week of free events. And this is Wednesday afternoon. Why didn’t you tell me about this sooner?”

“Well,” I would say sheepishly, “that might have something to do with me not opening every email I receive in the most timely manner. Not yours, of course.”

But all is not lost! The seminars we’ve missed are recorded and also available. These include:

• Disability is a Daunting Task – Right?
• The Flip Side: Attorneys and Return to Work
• Vocational Retraining: a Viable Return to Work Option

and many more. Speakers include attorneys, an ergonomics specialist, a medical doctor, human resource professionals, Ms. Spence, WorkCompEdge contributor Frank Pennachio, and others.

Visit www.brighttalk.com/summit/nationalreturntoworkweek

This initiative mirrors many of the principles we advocate in WorkCompEdge, and we congratulate Ms. Spence on her leadership and vision.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Tim Coomer, Specific Software

Part 4 of the series “The Power of Intentionality”: Part 3

Those of you who are regular readers know that my early career was spent as a systems analyst in the defense industry. If you’ll bear with me mentioning it again, that job taught me something that applies to today’s blog: focusing on one piece of a large, complex system can easily lead to weakness in other parts of the system. And, elements that will challenge a system – such as ballistic missiles – will find the weak parts of the system and potentially take advantage of them.
Is your work comp focus too narrow?

With work comp being as big and complex as it is, it hardly feels like I left defense systems. Many of the same principles apply, and here’s the principal weakness I see with how employers try to manage work comp: During the past several decades, employers and the risk management industry have focused on safety as the ultimate solution to lower workers compensation costs. But despite the tremendous effort put into safety training – and the significant gains in work place safety – many employers still struggle with workers compensation losses as a significant and often unpredictable expense.

• hiring someone with a medical history that comes back to bite you
• having the attitude that accidents are inevitable
• assuming that human resource and medical personnel communicating with an injured employee is enough
• not understanding how important it is to get an employee back to work, even if on modified duty
• being satisfied with a mod of 1.0
• buying work comp insurance with a “low bid” mentality
• and so much more!

 

Editor’s note: I’m here to confirm that Tim really can juggle, although as far as I know, he’s exaggerating about the flaming sword routine. However, if you talk to him, ask him about his unicycle!

The principles of juggling apply to managing many components of a big system such as work comp:

1. You have to touch each object on a regular basis. In other words, you can’t focus just on safety, or just on return-to-work, or just on the mod. There are 15 WorkCompEdge modules, and eventually, you should be using all or most of them.
2. You have to manage your speed. For example, this is why we recommend quarterly reviews of data in the Verify Your Mod module and workbook. This is why your actions in the first 24 hours following an injury are so important.
3. You have to manage your accuracy. If your payroll isn’t classified correctly, you may be paying too much in premiums. If your losses aren’t classified as medical-only when applicable, your mod may be much higher than you deserve. If claims aren’t closed in a timely way, it can affect your mod. These are just a few examples.
4. The right kind of object will make juggling easier. You don’t start out juggling flaming swords (I’ll post the YouTube video of me doing that soon.) The right tools and automation are going to help you maximize your success. Enough said!
5. Starting with a small number of objects is easier. This is why we have our Getting Started quiz, to help you prioritize which issues you should consider first.
6. Of course, you get better – and can juggle more – with practice. This is why module after module in WorkCompEdge urges you to come back and reassess on a regular basis.
7. And finally, at any given time, you have to have a mind’s eye view of where each object is. As you practice more, you develop this ability – and even an intuition – that helps you continue to improve.

 

http://www.SpecificSoftware.com
http://www.WorkCompEdge.com

Prior to my career in defense, I fueled planes at an airport, where there would sometimes be fairly long delays between flights destined for our terminal. During the downtime, I taught myself to juggle. I still keep beanbags in my office to entertain and relax myself (and to challenge our blog editor Kory Wells, who has yet to get the hang of it).

by Kory Wells, WorkCompEdge Blog Editor

by Kory Wells, WorkCompEdge Blog Editor

One of the more dreaded phrases in the English language – particularly on high school and college campuses – is probably “compare and contrast.” As in:

• For 20 points, compare and contrast mitosis and meiosis.
• For 30 points, compare and contrast the style and theme of Shakespeare’s “Sonnet 18″ to “A Red, Red Rose” by Robert Burns.
• For 50 points, compare and contrast the economic, political, and social structures of ancient Athens to modern-day Iraq.

Comparing and contrasting your work comp experience to industry standards isn’t difficult with the right information and tools. (Shakespeare would insist on complete sentences, of course.)

If these questions (which I found on the Internet, by the way) give you a not-so-nostalgic pit-in-the-stomach feeling, you’re definitely not alone. If you’re like me, you’re grateful such academic gymnastics are in your past. But here’s a compare and contrast exercise that will be useful to your company today:

Compare and contrast your company’s work comp losses to the average for your industry. Use actual and expected losses on total, primary and excess amounts. Include comparisons on a policy period basis. Use complete sentences.

OK, you don’t have to use complete sentences. Even without that directive, this analysis can still sound a bit intimidating. However, if you have a mod worksheet from NCCI or another bureau, all the data you need is on the worksheet – and at least some of it is already summarized and ready to use.

The whole purpose of the mod calculation formula is to compare your company’s loss experience with the average for your industry. The code word for this in mod-speak is “expected.” On your worksheet, you see total expected losses, total expected primary losses, and total expected excess losses. If you don’t know the differences between all these expecteds yet, don’t worry. It’s enough to know that these values reflect the standard, or average, for your industry for a theoretical company that has the same payroll you do.

The mod itself tells a story, comparatively speaking: if your mod is over 1.0, your compare unfavorably to other businesses in your industry. If your mod is under 1.0, you compare favorably; you are, as we’ve said in other blog entries, “beating the average.” But the formula can be broken into components which can be analyzed for additional insight. So let’s take this exercise in pieces:

1. Compare your company’s total losses to the industry average.

Why you want to do this: This comparison provides a general indicator of your loss experience.

How to do this: Divide your total actual losses (box H on the NCCI bureau report) by total expected losses (box D).

2. Compare your company’s total primary losses to the industry average.

Why you want to do this: This comparison provides an indicator of whether too MANY losses are keeping you from reaching your minimum mod.

How to do this: Divide total primary losses (Box I) by expected primary losses (Box E).

3. Compare your company’s total excess losses to the industry average.

Why you want to do this: This comparison provides an indicator of whether the SEVERITY of your losses is keeping you from reaching your minimum mod.

How to do this: Divide total actual excess losses (Box F) by expected excess (Box C).

Now, for the trickier stuff: compare your actual versus expected losses for each policy period in the mod. This is harder to do because all of the totals that you need – by policy period – are often not shown on the bureau worksheet. So, you’ve got to haul out the slide rule, calculator, Excel workbook, or (ahem) ModMaster software to make this easier.

This seems like a good time to mention the WorkCompEdge Proposal Report that employers or (more likely) their insurance agents can print from ModMaster. We discussed the first part of this report, about what your mod is costing you, in another blog entry. Now let’s look at the second part – How Your Company Compares to Industry Standards.

Here’s a snippet of a sample WorkCompEdge Proposal Report that shows how you can use mod data to compare your company to industry standards – and identify trends that will affect your future mods.

The first 4 bullet points in the report excerpt correspond to the comparisons we discussed in items 1-3 above (note the wonderfully complete sentences), and the graph on the left, Actual vs. Expected Losses, visually shows the same information. In this sample, when so many of the percentages look so good, the 134% ratio of the primary loss comparison stands out. While this company has a pretty healthy mod, that 134% points to a clear opportunity to reduce the number of losses they’re experiencing and thus drive their mod even lower, for even more cost savings.

The graph on the right, Loss Trend, shows the actual losses and expected losses for each policy period. This graph is really helpful for two reasons:

First, it shows us the general trend of losses for our own company versus the industry average. In this particular example, we see that this company has never exceeded industry norms, and that in the most recent year they’ve beat the average by quite a bit.

That’s important information, but we can also discern more. This graph also lets us see the anomalies that a certain period may be contributing to the mod. In this case, the “blip” of increased actual losses in 2006 is probably the principal contributor to the mod. So, until 2006 comes out of the calculation (after one more year), the mod is going to stay a little higher. When policy year 2006 no longer affects the calculation, provided that the latest trend has continued, THAT’s when the mod will really decrease.

So, for real cost savings – not points on a test – compare your work comp losses with industry averages using mod analysis.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Tim Coomer, Specific Software

Today we continue the series inspired by the marathon goals of our actuarial analyst Tony King. Now that we’ve outlined all that being intentional encompasses in part 1, let’s talk more about the root of it all: a vision.

“If you want to reach a goal, you must ’see the reaching’ in your own mind before you actually arrive at your goal.”- Zig Ziglar
A vision statement often takes the long view: a bold statement or dream for the future.

Whether it’s for an individual or an organization, a vision drives all other components of intentionality as you strive for the knowledge, intelligence, measurements, discipline, and repetition it takes to reach a goal or level of achievement. In Tony’s case, the vision could be simply stated: he wanted to qualify for the Boston marathon. But a vision statement can be considerably more complex, especially for an organization.

Do I hear some of you groaning now? I’ll admit, the words “vision statement” can conjur the image of a slow and painful staff meeting, something we avoid as much as possible here at Specific Software and SIGMA. But Zig Ziglar hasn’t been talking about goals and visualization techniques for all these decades for no reason.

So, what’s your vision for your workers’ health, safety and productivity, and how should you define it? What things should be considered? Here is a list of questions to get your thinking on the right track.

• What type of workplace do you want to have?
• What is the culture you are trying to create?
• How does the wellness of your employees affect your business, and what is your business’ role in supporting employee wellness?
• How is safety viewed within your organization?
• What is your view of and relationship with OSHA?
• What is the relationship between management and line employees?
• What responsibility do you have in gathering and determining the accuracy of data pertaining to the premium audit?
• Should your organization take time to understand, analyze, and manage the experience mod?
• Are you trying to buy the cheapest insurance possible or do you have a broader goal?
• Do you have a vision for how your agent and insurance company should serve YOU the CUSTOMER?
• Do you or should you have a leader who oversees many aspects of injury management?
• Is there a commitment to having a relationship with a local clinic?
• Do you know what happens right after an injury occurs and how your organization will respond to it?
• How are injured employees treated?
• What do the processes you go through to hire someone look like?
• How is an injured employee returned to work?
• What is the driving force behind your organization?

This list presents a lot of questions to help you form a vision that will guide you through the remaining principals of intentionality. Your complete vision might look something like this:

Does this seem like a tall order? It’s OK if it does! I even considered saying that XYZ is committed to a culture that eliminates all injuries. After all, a vision statement is often the long view: a bold statement or dream for the future. For more about leadership and vision, see An Interview With Leslie Kossoff on Management Leadership Skills, or chapter 10 of The Leader’s Guide to Storytelling by Stephen Denning, which gives a template and considerations for crafting a “future story,” which is what a vision is.

Of course, having a vision statement is only worthwhile if you compare the actual conditions of your workplace against your vision on a regular basis and work to make needed changes…which is where we’ll pick up next time with how knowledge applies to the power of intentionality.

by Maureen Gallagher, WorkCompEdge Regular Contributor

Layoffs have become an unfortunate reality of everyday life in America. While historically layoffs are often due to legitimate competitive practices (and in some cases corporate heartlessness), I don’t have to tell you that almost all layoffs in the past 18 months have been due to the severe economic downturn. A full article addressing layoffs and terminations, discrimination, duties of the employer to comply with state and federal laws, and more about the human costs on both the laid off and remaining employees is available to WorkCompEdge members on our wiki. For this blog, let’s take a further look at work comp claim issues associated with layoff situations:

Don’t just do the paperwork: employers mustover communicate in layoff situations. These are human beings whose lives have just been turned upside down. The surviving employees will give the employer the benefit of the doubt and their commitment to the employer if the employer tells them the truth and treats the employees who are leaving with fairness and compassion.

It is a documented fact that an impending or even threatened layoff increases workers compensation claims…especially in a tight job market. Individuals faced with a reduction in their income, temporary unemployment benefits and the likelihood of unaffordable health insurance may look to workers compensation as a way to ensure their income is sustained in the face of a layoff or termination. Even the rumor of layoffs and company reorganizations is enough to scare some employees into filing a work comp claim. But note: simply because an employee files a claim after his or her employment ends does not necessarily mean that the claim is fraudulent. Some employees, previously worried that filing a claim would affect their job security, go ahead and file once they are terminated. Whether the injuries are real or imagined, the fact is, workers compensation claims increase during and after a layoff.

Employers can’t completely stop illegitimate claims from being filed, but there are steps they can take to prepare for defending against such claims – and thereby minimizing costs. The following techniques, a list I’ve tweaked from an article by the Louisiana Workers Compensation Corporation to include my own experience, can avoid or minimize claims cost following downsizing, terminations or layoffs.

1. Communicate with Your Insurance Carrier

Let your insurance carrier know about any downsizing plans your company has. The carrier should be more than willing to strategize with you on ways to thwart any fraudulent claims. Report any suspicions you have about a claim, along with all the reasons for your suspicions, to your workers compensation carrier. The earlier you voice concerns, the better the opportunity to investigate, gather medical evidence and discuss strategy on defensible positions.

2. Focus on the Things You Can Control

The workers compensation system was designed to protect the employee and the laws favor the employee. However, measures can be taken to minimize cost and limit the life of the claim. Often this is the goal – reducing cost and the life of the claim – which can be frustrating to employers. The reality of workers compensation claims is that they are not won by hitting a home run. Rarely is there one isolated piece of information that “knocks it out of the park” and provides an ironclad denial. Claims are won through a series of singles. Documentation of anecdotal evidence (the employee was fine on the last day of employment; no one saw the individual get hurt; the employee was observed using the body part he or she is alleging is not functional etc.) and objective evidence (the independent medical exam’s x-ray or MRI shows no injury) builds your defensible positions and gets you to home base (which is usually a negotiated settlement). The value of the claim will be substantially less with well documented information. The claims take patience and persistence to resolve as bringing the employee back to work (the most common resolution to workers compensation claims) is not an option in a layoff situation. The lack of this option complicates the claims handling. The efforts and costs expended to defend suspect claims is difficult but worth the aggravation as it far outweighs suffering the enormous cost of a permanent long term workers compensation claim.

3. Revisit Your Accident Reporting Policies

Require all employees to report accidents immediately, no matter how minor.

4. Recommit to Thorough Accident Investigations

Accidents in times of company turmoil can be especially upsetting, but this is not time to get lax on your procedures. Investigate accidents immediately after they’re reported. Separate witnesses from each other and the injured employee to get the whole story – and signed statements. Remove or restrict access to any equipment or other physical evidence involved until it can be examined. Address any other hazards which may have contributed to the accident as soon as possible.

5. Be Vigilant About Your Recordkeeping

Many of the workers compensation claims filed after employment ends are occupational disease in nature. Claims for hearing loss are common after layoffs. Be vigilant about your industrial hygiene recordkeeping, including baseline levels of noise, airborne particles, in-door air quality, chemicals and dust exposures. Also be sure not to neglect equipment condition or housekeeping inspection logs. Make sure records are not destroyed, since employees’ payroll, schedule and accident reports may become evidence in a claim after their employment has ended.

6. Use Wellness Exams and Videocams to Document Employees’ Health

Many employers contract with their workers compensation medical provider to conduct physical examinations to determine an employee’s overall health and fitness status preceding a layoff. Employers may also videotape work areas to document employees performing their usual duties. These tools can help establish an employee’s health and activities at the time employment ends. A cautionary note – information obtained about an employee’s health must not be used as a reason to terminate or lay off the individual. This would violate the Americans with Disabilities Act.

7. Ask Employees to Confirm They Haven’t Had Unreported Accidents

As part of an employee’s exit interview, have the employee sign a form stating whether they have been involved in any unreported accidents on the job. This is an important document that can help defend any claims arising after employment ends.

8. Invest in Employee Assistance Programs

Terminations can easily and understandably thrust employees into an antagonistic frame of mind that can lead to fraudulent claims, but this can be mitigated if the employer communicates caring in the exit interview – and provides some real programs to support those sentiments. Consider job fairs, resume counseling, placement services, on-site therapy, and other services that demonstrate your concern for your terminated employees’ welfare.

9. Consider Stepping Up Security Measures

As we all know from unfortunate events reported in the media, workplace violence is a real concern following layoffs or terminations. Any employee hurt on the job through violence of another current or prior employee will result in a workers compensation claim. Examine the level of security you can provide for remaining workers. Use exit interviews to assess an employee’s attitude and tendency towards violence, and take all threats seriously. Employees probably should not have unescorted access to work areas following a layoff or termination.

10. Watch for Potential Fraud Indicators

Familiarize yourself with the warning signs of fraud developed by the National Insurance Crime Bureau:

• the employee is disgruntled after being fired or laid off
• the employee has been told his or her employment is about to end
• the employee is having financial difficulties
• the accident is not witnessed
• the injury involves subjective complaints of pain with no ability to obtain objective medical evidence

Your claims adjuster is undoubtedly familiar with these, but, as noted in our first point, your awareness and good communications will facilitate optimal claims handling.

Conclusion

Although none of these tips may actually prevent an employee from making a workers compensation claim after leaving an employer, they can assist in defending against such claims. The more evidence to present to the judge that there was no mention of any accident until after employment ended or was announced to end, the stronger the defense will be.

Employee reductions can pose a significant challenge for employers and often a devastating turn of events for employees. It is important for employers to have a layoff strategy broken down into goals and an action plan for the company. The layoff can be so overwhelming an employer may forget the overall company’s vision and strategy. Each employer should ask the question; “How do we not just survive but thrive after a layoff? How do we inspire our remaining employees to achieve amazing things… to continue their focus and innovation and not be paralyzed by these troubled and uncertain times?” First, every employer must over communicate in these situations. The employer should reiterate the vision and strategy of the company and the action taken (layoffs), although painful for everyone, accomplishes the mission.

Next, keep in mind; these are human beings whose lives have just been turned upside down. The surviving employees will give the employer the benefit of the doubt and their commitment to the employer if the employer tells them the truth and treats the employees who are leaving with fairness and compassion.

Don’t miss the full article on this topic, available to WorkCompEdge members, on our wiki.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Kory Wells, WorkCompEdge Blog Editor

Perfect and yet attainable scores apply to many areas of life: credit reports, bowling, the game of Yahtzee, and ACT college prep exams immediately come to mind. These are cases in which the higher the score, the better. Less commonly, an excellent score is represented by a low number: as our director of strategic consulting Lloyd Kelley would be quick to point out, golf is an example, even if it doesn’t have a true perfect score.

If your mod was a game of golf, you’d want it to be under par – not just average. You also want to know what your company’s perfect score can be – and then implement loss control and prevention measures to attain that perfect score.

Did you know that you can have a perfect score on your workers comp mod?

You can. But here’s the tricky part: the perfect score for your mod is unique to your company. It will be different from the perfect score of the company next door, or your competitor across town. It may change somewhat from year to year. The variability is due to the fact that the mod is based on your unique industry and payroll. But it is a real, attainable number, not just a theoretical best case scenario.

Many employers have the idea that a workers comp mod of 1.0 is, if not perfect, at least the goal that they want to reach. This is like saying a “C” on your grade school report card is good – or that you’ve shot par on the golf course. You may be pretty happy with it, but in truth, a mod of 1.0 is only average. If you want to beat that average, and thus lower your workers’ compensation insurance costs, you’ve got to know the value of your minimum mod – your perfect score – and your controllable mod.

Every mod value can be broken into two pieces: the minimum mod and the controllable mod. The minimum mod is that perfect score: the lowest possible mod if your business had no losses for the experience period (typically three years). The controllable mod is the difference between your actual mod and the minimum. This value is a direct result of the losses your company had during the experience period.

Attaining your perfect score directly impacts your work comp premium costs

The minimum mod and controllable mod are important for two reasons. For larger companies, these values highlight the savings that are possible by controlling losses. For example, as shown in the report example below, a large company with a mod of 0.98 may think they are doing quite well, however, since they have a controllable mod of 0.22, there is significant room for improvement – which in this case translates to a $44,000 cost savings!

For a small company, the minimum and controllable mod values can be used for setting realistic expectations; for example, a small risk that sets a goal of having a 0.80 mod will not be able to achieve it under any circumstance if the minimum mod is 0.85.

Here’s a snippet of a sample WorkCompEdge Proposal Report that shows the minimum mod and controllable mod – and how much money this company could be saving!

No matter the size of your company, knowing the controllable mod is critical to understanding the possible savings achievable by reducing that controllable mod to 0 through loss control and loss prevention activities.

by Kory Wells, WorkCompEdge Blog Editor

Our blog earlier this week about staffer Tony King’s marathon training and intentionality seems to have started a trend: WorkCompEdge regular contributor Maureen Gallagher is also preparing for a big physical challenge ahead of her, and we’re hoping WorkCompEdge readers might help. Maureen, who’s also a partner with Neace Lukens, is going to be fighting childhood heart disease – and testing her own physical limits – in the grueling Carew Climb, part of the Skyscraper Vertical Mile challenge, on Sunday, February 22 at Cincinnati’s Carew Tower.

Specifically, that means she’ll be climbing and descending the Tower’s forty-five floors ten times, with another eight floors and six steps thrown in just to round off the total distance to one mile up and one down—a total of 3,780 stairs in under three hours. And by auctioning off each one of those stairs, she’s hoping to raise enough money to send twenty kids to camp through Hope With Heart as well as raising money for the American Lung Association, the Climb’s sponsor.

Established as a summer camp experience, Hope With Heart provides year round support and friendships for its campers. The camp, now in its tenth year, is unique because it accepts high-risk children with limited life expectancies. The camp has children with varied heart problems such as valve replacements, pacemakers and transplants. Providing a recreation and social eight-day camp experience for children ages seven to fifteen, Hope With Heart has transformed the lives of more than 400 children with serious heart disease through the generosity of contributors.

by Tim Coomer, Specific Software

As you may know, we have two affiliated businesses under one roof here at Specific Software and SIGMA Actuarial. Our actuaries hang out on the “south side” of the office, while most of our software staff is located on the north end of the floor. This provides us with the opportunity to kid each other about where the brain power resides. One of my favorite targets for this friendly ribbing is actuarial analyst Tony King.

SIGMA actuarial analyst Tony King has been very intentional about his marathon goals. At WorkCompEdge, we believe the components of his intentionality can apply to any goal, including a new vision for your company. Photo courtesy of Mike Stanfield.

Tony is mild mannered, humble, intelligent, highly disciplined, and focused. But, as he recently taught me by example, he’s also very intentional in working toward his goals. Tony has been a runner most of his life, although he took a break from it while his children were young. Now he puts in about 60+ miles per week. Last year he decided to step up his training in order to decrease his time and qualify for the Boston Marathon. Popping into his secluded south side office ever so often, I kept up with his progress and learned a lot that can apply to any goal:

Being intentional requires specific knowledge

Tony bought Lore of Running – and actually read it. (I have a copy collecting dust on my bedside table.) Gathering the knowledge one needs to effect change is a crucial first step that takes initiative.

Being intentional requires whole system intelligence

Tony then put the knowledge from his reading into practice. Knowledge is, in my definition, information and facts. Intelligence is a more abstract concept that involves applying knowledge to the whole system or “big picture” – in this case, Tony’s body and environment – to the challenge at hand. Intelligence includes a healthy dose of creativity, reason, and abstract connections between seemingly unrelated items to bring about change and improvement. It is one thing to read the Lore of Running, but is an entirely different level of functioning to know what the heck it means to you!

Being intentional requires quantitative measurements

Tony strapped on numerous electronic devices and gathered heart rate, distance, time, and speed data he needed to measure his progress. He then downloaded this data to a computer and gained insight that led to new questions and new measurements – and thus the feedback loop got tighter and tighter. Some of his insights – like how his heart rate correlated with his endurance – were new for him. They also led to new strategies, such as starting slow and ending fast. Some of his discoveries were not intuitive, thus proving the value of lots of measurements and an unbiased analytical approach.

Being intentional requires discipline

Tony used his knowledge, intelligence, and quantitative measurements to develop and execute specific action plans. Most of us can figure out what to do to a reach a goal – it is the doing itself that we struggle with. Discipline overcomes that emotional resistance.

Being intentional requires repetition

After going through the process above, Tony wasn’t sure he was where he needed to be, so he started the entire process over again. He reached out to new experts, identified road blocks, doubled his efforts, measured data again, tried new things. He persevered.

Being intentional produces results

Tony was shooting for a time of 3:15:59 to qualify for the Boston Marathon. He ran the Marshall University Marathon in West Virginia and finished with a time of 3:15:28, trimming about 30 minutes off his previous personal best!

So, when did Tony succeed? Would this have been a worthwhile effort if he finished with a time of 3:16:00? Certainly! The moment Tony decided – to the exclusion of all other options – that he would pour his heart and soul into creating a new level of performance, he created a new reality for himself. Which brings me to my final point:

Being intentional requires a vision

I don’t use the word decision lightly. A true decision leaves no alternative because it’s based on a vision of where we want to be. Arguably, the vision – of qualifying for the Boston marathon – is the first thing Tony had in this process. But he also kept that vision foremost in his mind. A solid vision guides our decisions and provides opportunities for the future.

So what’s your vision as an employer? What’s your “Boston marathon” goal?

by Tim Coomer, Specific Software

In our local area, a radio commercial for a life insurance company seems to run about ten times a day. In a dramatic voice, the announcer explains that we all need life insurance for the “unforeseen.” It is exactly the “unforeseen” that causes so many of the severe and tragic workers compensation losses that our actuarial firm sees in the the analytical consulting projects we do. 

You CANNOT “punt” on planning and training for foreseeable emergencies and catastrophes – because this is what is going to save you or mitigate damage when the significant unexpected event occurs.

While I sat in traffic recently and heard this commercial for what must have been the 1,000th time, I quickly ran through some of the “unforeseen” things that I’ve personally experienced in my lifetime. Have you ever done this? It is amazing how many things we all must confront in the normal course of life. Here are a few of the highlights for the ones that worked out well for me:

• Having at least 6 trips to the emergency room for injured kids (broken bones, car wrecks, head injuries – oh! the joys of parenting).

• Being the passenger in a high speed car crash. (The car was totaled – I was lucky to survive with recoverable injuries!)

• Having the doctor tell my wife and me that our unborn child had a 0% chance of being born. (The doctor was wrong – the kid is awesome.)

• Living through a house fire. (The house didn’t fare too well, but family did.)

• Confronting a home intruder. (I used my most intimidating primal scream!)

• And my personal favorite, which goes back a while – being chased by the neighborhood German shepherd when I was 8 years old!

Thoughts of these could-have-been disasters brings me to the question: How do you prepare for the worst possible scenario, the unexpected, and the catastrophe that could threaten your business? Some employers believe you can’t prepare and therefore don’t bother. However, I recently got another perspective on this when I had the opportunity to hear Rudy Giuliani speak.

Rudy is a great speaker. Watching him live is very inspiring. He is an effective story teller and, as you might guess, has some pretty amazing and powerful stories to relate. Rudy asked the question, “How do you prepare for the unknown?” Obviously, there was no way the city of New York could have prepared for the 9/11 catastrophe. While I am sure the volumes of studies done on the response find areas for improvement, the city of New York can be proud of how it dealt with this unimaginable scenario.

Rudy shared his theory on this: “Prepare for everything known and you will be prepared for the unknown.” He goes on to describe how the city had action plans for specific disaster scenarios. Each plan was divided into components and each component was then well researched, planed, and rehearsed. One example might be setting up a triage near a large industrial accident. Despite the extensive preparation that the city had undergone for various disaster scenarios, there was no plan for the collapse of the World Trade Center twin towers.

When Rudy arrived on the scene, he began to direct all the city’s departments to pull components of other emergency plans together to create, on the fly, a custom response to the emergency at hand. Because they had planned for everything they could imagine and had their plans compartmentalized into specific function areas, they were able to respond to the unimaginable. While I cannot do this story justice as Rudy so passionately does, I can relate this to the importance of disaster planning for an employer. You CANNOT “punt” on planning and training for foreseeable emergencies and catastrophes – because this is what is going to save you or mitigate damage when the significant unexpected event occurs.

In more recent news, the US Airways captain who successfully protected the lives of his passengers and crew after losing both engines on his Airbus 320 after takeoff probably never trained specifically for so masterfully using the busy Hudson River as an alternative runway. But, if you read his resume you will notice that Captain Chesley B. “Sully” Sullenberger III had, in addition to his training as a pilot, extensive experiences related to safety and risk management. He had practiced, without doubt, thousands of emergency situations over his 40 years of flying. He had studied safety and participated in accident investigations. His training and experience also included glider flying – a handy skill when your Airbus becomes a 160,000 lb glider over one of the most densely populated cities in the country. So what was the payoff for the untold hours of training and emergency drills for theoretical situations that never actually happened? A miracle!

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Kory Wells, WorkCompEdge Blog Editor

If you’ll indulge us a moment of shameless self-promotion, we’re excited to share with you that WorkCompEdge has been awarded Best of Show for “distinguished technical communication” in the 2008 Technical Communication Competition sponsored by the middle Tennessee chapter of the Society for Technical Communication (STC). 

The judges particularly mentioned this WorkCompEdge video from the Avoid Low Bid Mentality module about “you get what you pay for.” If you have trouble viewing the video above, try this link.

We received top honors from the judges, whose written statement about the site included the comments:

• “extremely well-planned”
• “intelligently thought-out”
• “design planning that accounts for all learners”
• “concise, clear and useful topics”
• “entertaining and impactful visual ideas” (our videos also won an award for excellence in the “promotions” category)
• “perfectly executed”

http://www.SpecificSoftware.com
http://www.WorkCompEdge.com

by Maureen Gallagher, WorkCompEdge Regular Contributor

A few years ago, employers in the state of Virginia were initially gratified by the Virginia’s Supreme Court’s ruling to exclude illegal immigrants from the protections of workers compensation. But in an almost immediate demonstration of the law of unintended consequences, the onslaught of litigation had employers clamoring to amend state law to explicitly include aliens, both legal and illegal.

Without the remedy of workers comp – and the careful adherence to changing state and federal obligations regarding immigration, an employer may be sued.

Admittedly, workers compensation is an imperfect system, and its imperfections vary from state to state. Nevertheless most workers compensation stakeholders would argue it is certainly better than the alternative…an injured worker as a plaintiff in a civil tort suit in front of a jury of his or her peers. Instead of statutory limited benefits, the employer is exposed to open tort award.

According to the National Conference of State Legislatures, more than 1,500 pieces of legislation related to immigration have been introduced in state legislatures in the last year. Much of this legislation creates significant new obligations for employers. Depending on the state, the penalties may include:

• fines
• loss of business license
• allowing illegally employed workers to pursue tort cases against the business
  labeling non-compliance as a felony
• loss of workers compensation exclusive remedy, and
• voided workers compensation insurance coverage entirely (requiring the employer to pay the medical and lost wages) for illegally hired workers.

As the immigrant population—both legal and illegal—continues to grow in the United States, their numbers will continue to expand among the American labor pool. This increases the chances that employers will hire aliens and suggests that their potential involvement in issues dealing with workers compensation related to these employees will also increase. As the old adage goes, “Ignorance of the law is no excuse,” and the trend in most states is to echo that sentiment with tougher laws against employers who would hire illegal aliens—perhaps to circumvent the need to pay for benefits such as workers compensation. Unfortunately, as states scurry to catch up through the legislative process, many variations make up the rugged terrain of workers compensation. Employers and their insurance advisors need to be informed and vigilant to be able to negotiate this territory successfully.

Three primary issues arise in workers compensation cases involving illegal aliens:

1. Are illegal aliens included in the definition of “employee” under state workers compensation law?

2. Does the Federal Immigration Reform and Control Act (IRCA), as interpreted by the Supreme Court’s decision, preempt state workers compensation laws?

3. If an illegal alien is an employee, does his illegal status deprive him of certain compensation benefits?

Employers must follow a checklist to determine the legal status of new hires, and follow up in writing with any new hires who cannot be verified through the Social Security Administration.

A full article addressing these areas and examples from many states is available to WorkCompEdge members on our wiki in pdf format. The “Legal status of new hires” checklist and sample letter is also new content available in the More Depth section of the Avoid Hiring Your Next Workers Comp Injury module.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Tim Coomer, Specific Software

In our last blog before the holidays, I was telling you about the materials in Jim Rohn’s Weekend Leadership Event. I wanted to mention Mr. Rohn one more time, in view of the resolutions that some of us may have made for the new year. Let’s talk about some of Mr. Rohn’s suggestions related to personal growth. What? Do I hear you groaning? No, I’m not trying to talk you into some new fitness or sales goal. I’m suggesting instead that the principals and observations that Mr. Rohn makes about personal growth easily translate to challenges employers face – and to the work comp resolutions you’ve made for the new year. You have made some resolutions, right?

Successis nothing more than a few simple disciplines, practiced every day. – Jim Rohn

Discipline is remembering what you want. – David Campbell Founder, Saks Fifth Avenue,quoted in 100 Ways to Motivate Others by Steve Chandler and Scott Richardson

Will these changes get you to success overnight? Most of the time, no – but as with personal goals, if you change your thinking and your habits, your world will change!

First, he says, you have to study how to stay healthy

If you’re an employer struggling with work comp costs, it’s critical that you decide to engage in the study and practice of business processes that will eliminate your work comp issues. This is a commitment to read the latest blogs, journals, and books (and all that handy WorkCompEdge content, if you’re a member) and to understand what a “healthy” business with low work comp costs looks like.

Second, you have to actually do what it takes to become and stay healthy

Of course we all know that only reading about good business and work comp practices isn’t enough. One employer recently told me that if they conducted a drug test on every job applicant they wouldn’t be able to hire anyone! Now, that seems like a problem to me – did I miss something? I wanted to ask if they had considered the liability cost of a deadly accident. To use the personal health analogy, you can’t be slamming back the junk food at lunch every day and not expect to eventually pay the price… which leads me to my next thought.

Daily habits matter

It may not happen until your forties or fifties, but a daily lunch of junk food will catch up with you. Conversely, let’s say you’re 30 pounds overweight and switch that junk food lunch to salad and fruit. Changes won’t happen overnight, but changes will occur. The point is, you can get away with errors in judgment for a while and fall into a false sense of “it doesn’t really matter.” But, as Mr. Rohn says, “everything matters.” Eventually, sloppy business practices – such as ignoring good hiring methodologies, expecting that a perfect safety rating is not realistic, or failing to train supervisors on their “soft skills” when dealing with injured employees – will cost an employer an enormous amount.

Do the disciplines

The daily, weekly and monthly business processes which we describe within WorkCompEdge will begin to transform a business and lower work comp losses. Will these changes get you to success overnight? Most of the time, no – but as with personal goals, if you change your thinking and your habits, your world will change!

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Tim Coomer, Specific Software

Editor’s note: In today’s blog, Tim has a “baker’s half dozen” of ideas for you. “Baker” reminds me of homemade rolls and cookies, which in turn reminds me of the rapidly approaching holidays. This is our last blog for 2008. We’ll be taking a break for the next couple of weeks, but we’ll be back in the new year with more ideas to inspire work comp cost and productivity improvements. We are grateful for your readership, comments and emails and wish you and yours every blessing of the season. – Kory Wells

“In what I’d call a corollary to the 80-20 rule, Mr. Rohn suggests that about a half dozen facts and ideas will make 80% of the difference in any area you study. So what are those half dozen things in workers comp?

I am an avid goal setter. Each year in December I spend a lot of time setting specific goals for the coming year. This year, I decided to invest some time in viewing about 24 hours of material from Jim Rohn called Jim Rohn’s Weekend Leadership Event. I would strongly recommend this DVD set (and, no, Mr. Rohn doesn’t know me from a hole in the wall and I get no incentive for recommending his material).

I love the way Mr. Rohn presents complex concepts in a straightforward manner. Each word he uses is carefully chosen, and the message is always precisely on target. Today, I was listening to him discuss “fundamentals.” In what I’d call a corollary to the 80-20 rule, Mr. Rohn suggests that about a half dozen facts and ideas will make 80% of the difference in any area you study. If someone says, “Let me teach you the 50 fundamentals” you need to be concerned, he believes. This concept challenged me to wonder: what are the half dozen fundamentals of controlling workers comp costs for a typical employer?

I’ve developed the following list and provide these without explanation and in no particular order. I invite you to comment, or even to suggest I’m wrong (nicely, of course): Are these the principles that would make your list? Perhaps more importantly, do you even have such a list? And how do you get motivated to make a list – and then do something with it? This is a dicussion we’ll continue in the new year!

#1 – Have robust hiring practices that include the use of a conditional offer of employment and a robust medical screening that does not let 100% of the people through.

#2 – Actively measure and intentionally improve the safety culture of the workplace.

#3 – Have a well-trained injury management coordinator with clear authority and responsibility to oversee the rapid recovery and return-to-work of any injured employees.

#4 – Train supervisors to understand the importance of their relationships with employees and to optimally manage the post-injury supervisor / employee relationship.

#5 – Have a robust return-to-work program that ALL employees are aware of (there is some hidden psychology here) that gets employees back to work before indemnity payments start – a big benefit in ERA states!

#6 – Establish and nurture a working partnership with a medical clinic that will ensure effective medical screenings and, in the case of an injury, the right treatment plan that will lead to the most rapid return to work possible.

#7 – (I’m going for a baker’s half dozen here.) Work with a WorkCompEdge Member Agency that is like-minded about these fundamentals and can help you implement needed business changes.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Maureen Gallagher, WorkCompEdge Regular Contributor

In America, we have a Uniform Plumbing Code to protect the health of the nation (not to mention the sanity of plumbers and builders) and a Uniform Commercial Code enacted in all 50 states for a standard method of dealing with business law questions involving commerce. Unfortunately, no such code exists for our nation’s employers and employees for the purposes of work comp.

Knowing how the pieces fit together is especially challenging in work comp due to the lack of a national standard.

As states passed work comp laws starting in the early 1900s, each state established its unique work comp system. This resulted in a mishmash of laws, benefits, compensability and eligibility from state to state. There are many different, non-uniform work comp laws in the United States (state, territorial and federal). The state and territorial laws, which exist in every state, Puerto Rico and the U. S. Virgin Islands, are especially non-uniform in terms of which kinds of employments are covered, dollar amounts of wage benefits payable for different kinds and degrees of disability.

The complexity of our varied work comp system presents challenges for employers in three key areas:

• Establishing proper coverage in jurisdictions in which the employer has operations or other jurisdictions the employer has employees working, living or traveling in
• Understanding what jurisdiction benefits the employee can collect
• Determining what rates (premiums) will apply. (This subject mirrors in its complexity the coverage and benefit structures of the various state and federal laws. We will briefly discuss pricing and only as it relates to extraterritorial issues).

A full article addressing these areas in detail is available to WorkCompEdge members here on our wiki in pdf format.

The hodgepodge evolution of work comp laws has resulted in uneven or nonexistent uniformity across state jurisdictions, which creates challenges for employers when confronting extraterritorial issues, including questions of coverage, benefits and pricing.

Work comp coverage in various jurisdictions may depend on where workers reside, employer operations sites, licensing, and the willingness or reluctance of carriers to accept “broad” language in the work comp policy.

On the Information Page of a work comp policy, the insurance agent for the employer must have the insurance carrier list the states the employer operates in or expects to operate in at the inception of the policy. In a separate section, states are listed where an employer expects it may have employees working but the work in those states will begin after the effective date or renewal date of the policy (with some exceptions). The policy requires that the policyholder (employer) must notify the insurance company at once if the employer begins any work in any state listed in this section. Broad wording (suggested in the full article on this topic) is recommended to assure coverage in most jurisdictions even in unforeseen circumstances.

When a state is listed on the work comp policy, essentially we have attached hundreds of pages of work comp statutes and laws and thousands of pages of case law for that state. Add multiple states and I would argue that, although the basic policy is only about six pages long, the addition of statutes and case law make the work comp policy the largest and most complex policy an employer buys.

Employees working, living, traveling in or through other jurisdictions frequently present special work comp challenges including state specific time limits, variations in benefits, state law, reciprocity agreements and other issues.

To compound the challenges, work comp pricing is often driven by pressure to minimize work comp costs. This presents risks to employers as carriers may deny claims or charge some or all of a claim back to an employer. Errors in extraterritorial issues can result in devastating financial consequences to employers.

Knowing how the pieces of work comp policy and law fit together is especially challenging due to the lack of a national standard. For agents and employers, it is critical to understand each state’s work comp laws, customs and practices and, in doing so, to secure the broadest coverage possible. They also need to understand that any claim can result in a dispute as to which benefits apply as well as other extraterritorial issues. In these cases, it is best to work through these issues constructively with employees rather than engage in a standoff.

If you’re a WorkCompEdge member, I hope you’ll refer to the full article on our wiki for much more depth on the subject of extraterritorial issues.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Kory Wells, WorkCompEdge Blog Editor

(Part 3 of the Series “Getting Started with WorkCompEdge”)
Okay – because you’re a dedicated reader, you already know to use the Getting Started with WorkCompEdge survey and the WorkCompEdge proposal report in ModMaster to help your company or client decide which work comp issues – and WorkCompEdge modules, if you’re a member – your company should focus on first.

We admit – our training videos may not be quite as exciting as a rock concert. But they’re another way we can help you rock with WorkCompEdge! Visit our training videos now

So you’ve utilized the survey and/or the report, identified the topic(s) which most need your attention, and now you’re chomping at the bit, as we say in this part of the country, to get started with a specific module in WorkCompEdge. (Or, if you’re still not a WorkCompEdge user, you’re curious to see what you would do next.) But how do you know what to do within the module? And how do you know that you’re not overlooking some wonderful features we envisioned and painstakingly labored to include on the site? If you’re asking such questions, then you’re ready for

Step 3 – Watch our introductory videos

As you’ve hopefully noticed by now, there are videos all over WorkCompEdge. Our spokesperson Holly starts talking as soon as you hit the site, and each of the 15 modules has its own vignette which illustrates the concepts of that module. But for this step, I’m talking about a couple of different videos, both narrated by the one, the only, the legendary Tim Coomer, our CEO.

When you have 9 minutes, watch the Introduction to WorkCompEdge video for an overview of the site’s navigation, module components, goals and more.

When you have 90 minutes, watch the WorkCompEdge Quick Tour. Yes, we realize that a 90 minute quick tour is a bit of a misnomer. But what can we do? Tim’s the boss. At this very moment, for example, he’s blasting circa 1987 Guns N’ Roses from his corner office and there’s not a thing any of us can do about it. So, he calls this video a quick tour, we all call it a quick tour. Seriously, as you might expect, this video goes much more in-depth and includes an overview of each of the 15 modules.

If you don’t have many minutes at all, you can still view these videos a segment at a time. They both have menu options so you can click to the parts that interest you most – or watch a little while, then come back and click in to where you left off.

Finally, this is a good time for me to mention that there are other videos to help you with specific workbooks associated with several of the modules in WorkCompEdge. Don’t miss them on the WorkCompEdge WebHelp page at www.specificsoftware.com/wcehelp/. All these videos are another way we can help you rock with WorkCompEdge.

More in this series “Getting Started with WorkCompEdge: Part 1 Part 2

http://www.SpecificSoftware.com
http://www.WorkCompEdge.com

by Kory Wells, WorkCompEdge Blog Editor

(Part 2 of the Series “Getting Started with WorkCompEdge”)

In last week’s blog I talked about tackling work comp issues “bird by bird,” so it seems only natural that this week we should move, in some fashion, to a discussion of cats, as in, “there’s more than one way to skin a cat.” This common idiom certainly applies to the many ways you could decide which work comp issues – and WorkCompEdge modules, if you’re a member – your company should focus on first.

Print a copy of the Getting Started with WorkCompEdge survey and consult with other staff before you complete it online. Don’t worry if you’re not very sure of how to answer all the questions – it’s meant to be an intuitive guide to identifying the work comp issues you should focus on first.

As we discussed in the last blog, the WorkCompEdge proposal report in ModMaster provides an excellent first step – and analytical method – for determining where to start making improvements to your company’s or client’s work comp picture. But we also think there’s merit in a more intuitive approach, so that brings me to

Step 2 – Answer some key questions about your company’s operations in our Getting Started with WorkCompEdge survey.

This survey, located at www.specificsoftware.com/wce/survey.htm
, consists of 19 questions to help a company assess its work comp strengths and weaknesses. Each “question” is really a statement with which you can strongly agree, somewhat agree, somewhat disagree, strongly disagree, or indicate neutrality. All questions have a ranking of importance which we’ve predetermined, but your positive or negative answers will, of course, further impact that ranking. Leaving a question blank is the same as a neutral response.

OK, now for the tricky part. Depending on the size and structure of your company, it may be difficult for one person to immediately answer all 19 of these questions. We have two suggestions:

1. Print a copy of the survey and consult with staff including the controller, insurance or risk manager, safety team leader, human resource personnel, and CEO to get these questions answered before you complete the survey online.
2. Don’t worry if you’re not very sure of how to answer all the questions. This is meant to be a more intuitive approach than the WorkCompEdge proposal report, so just give your gut response and move on.

When you submit the survey (using the button at the bottom of the survey page), results will be shown as a prioritized list of the WorkCompEdge modules. Whether or not you’re a WorkCompEdge member, you’re welcome to use the survey as a guide to determining the work comp issues that most need attention in your company. Give it a try – you’ll be the cat’s meow!

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Kory Wells, WorkCompEdge Blog Editor

(Part 1 of the Series “Getting Started with WorkCompEdge”)

Although I originally joined Specific Software as the programmer for ModMaster, nowadays I write words more often than I write code here at work. After I write and edit usage instructions, marketing pieces, educational information, web pages and endless emails – I then do the unthinkable, to some: I go home and write for fun. In all its forms – novel, memoir, poetry, etc. – I’m addicted to the written word.
How does this relate to you and work comp, you might ask? Well, one of my favorite books about writing is Bird by Bird: Some Instructions on Writing and Life by Anne Lamott. Believe it or not, some of the lessons in this book easily transfer to the process of improving your work comp picture. Bird by Bird got its title from an episode that Lamott relates in the book: when her brother was 10, he had to write a report on birds. He’d put it off and put if off, and now it was due the very next day. Lamott writes,

…he was at the kitchen table close to tears, surrounded by binder paper and pencils and unopened books on birds, immobilized by the hugeness of the task ahead. Then my father sat down beside him, put his arm around my brother’s shoulder, and said, “Bird by bird, buddy. Just take it bird by bird.”

Bird by bird. Doesn’t any big project – whether it’s writing a whole book, building a high-rise condo or planning to host the Olympics – loom large and unwieldly until you start breaking it into pieces? I hope that making changes to improve your work comp picture doesn’t feel quite as overwhelming as those tasks, but let’s face it: as the sheer number of modules (15) on the WorkCompEdge site attests, there are a lot of places you could start. How do you decide where?

Whether you’re an employer or an insurance professional, here’s what you need to do:

Step 1 – Start by learning what the mod can tell you

You probably already know that the mod is a number somewhere around 1.0, more or less, and that less is better. You hopefully know that the higher your mod is, the more you are going to pay in workers comp premium. If you’re in an industry like construction, you know that you may not be eligible to win contracts unless your mod is at least 1.0. But an analysis of your mod, which your insurance agent can do in our ModMaster software, will show you information such as:

• Your controllable mod – the amount of mod points you could save if you had no losses – and the corresponding money you could be saving on premium
• How much money you could be saving in premium for every point you trim from the mod
• How the number and severity of your losses compare to standards for your industry
• How your losses are trending, and therefore what you may anticipate for your future mod(s)

The strong WorkCompEdge Proposal report from ModMaster will show you or your client the top 5 or 6 areas of concern to prioritize when evaluating work comp improvement opportunities.

These factors and more are presented in the new, handy-dandy WorkCompEdge Proposal report in ModMaster, which then goes on to do some analytical behind-the-scenes crunching of that data to present the top 5 or 6 areas of concern that you should consider first. For example, if your analysis shows that loss severity is an issue, then this report is going to recommend you look at the Clock Is Ticking, Expedite Return-to-Work and Before and After an Injury modules first. If you have a frequency issue, it’s going to steer you towards the safety modules. If your mod is already great – either at or very near the minimum possible mod – then it’s going to steer you toward optimizing your costs through modules like Avoid Low Bid Mentality, Wellness, and others.

Here’s a sample of the WorkCompEdge proposal report in ModMaster. If you’re an agent, be sure to run it for your clients. If you’re an employer, be sure to ask for it from your agent. It’s a great way to decide – based on analytical data – which “bird” deserves your attention first.

http://www.WorkCompEdge.com

http://www.SpecificSoftware.com

by Maureen Gallagher, WorkCompEdge Regular Contributor

Editor’s note: today we welcome commercial insurance broker and consultant Maureen Gallagher as a regular contributor to the WorkCompEdge blog and wiki. Maureen, a partner with Neace Lukens and founder of Insurance Partners Academy, will be bringing commentary, success stories and in-depth analysis on current workers compensation affairs to us on a monthly basis. Read Maureen’s bio and this press release to learn more.

Will paying small medical-only bills rather than reporting them to the carrier save you money – or cost you? The answer’s not simple!

The most common question an insurance agent gets from employers is whether or not they should pay (or continue to pay) small medical bills on workers compensation claims rather than submitting them to the insurance carriers for payment. The answer to this question is not simple. It can depend on several factors including:

1. Whether or not the state has approved the Experience Rating Adjustment (ERA) in their experience modification formula.
2. Whether or not the employer has expertise in paying according to the state fee or reasonable and customary schedule and/or has access to discounted medical networks as insurance carriers do.
3. Whether or not a small deductible to handle small medical claims might be more appropriate and assist in complying with state rules.
4. Understanding the state rules and penalties where the employer is located.
5. Whether or not the state of operation has a favorable alternative option for handling small medical claims.
6. How organized and detailed the employer is.

For this blog, we’re going to focus on one concern related to the ERA, but a full article addressing more about ERA as well as these other factors is available to WorkCompEdge members here on our wiki in pdf format.

An Analysis of Reporting vs. Not Reporting in ERA States

Many of you do business in states which have approved the Experience Rating Adjustment (ERA) to the experience mod formula. Medical-only claims, also known as injury code 6 claims, are reduced by 70% in states where ERA is approved before they are utilized in the experience rating process. Also, the expected loss rate and discount ratio, used to compute expected losses and expected primary losses, have been changed to reflect that medical-only claims will be reduced by 70%.

Many feel the incentive to not report medical-only claims has been eliminated in states where ERA is approved. In the interest of showing that, I performed several “what if” scenarios on employers either reporting to the carrier or paying medical-only claims on their own in ERA states and its impact on the Experience Modification and the employer’s overall costs. The studies are conclusive that the employer did not save money by paying medical-only claims itself in an ERA state, particularly if the employer does not know how to apply the state fee schedule and/or has no access to discounted networks like those developed by insurance carriers. Here is an example.

Conclusion

If you’re a WorkCompEdge member, I hope you’ll refer to the full article on our wiki for much more depth.

The variances among states dictate that there is no one, simple answer to the employer’s quandary of whether to pay small medical-only claims or turn them in to the insurance carriers for payment. An employer must weigh the advantages and disadvantages of paying small medical claims after obtaining a complete understanding of their state’s rules and laws, evaluating their staff’s ability to effectively manage their own medical bills and reviewing the insurance alternatives available that take paying small medical claims into consideration.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Frank Pennachio, WorkCompEdge Regular Contributor

Barack Obama was yesterday’s winner by notable margins in both the electoral and popular votes, but those two sets of numbers (currently 349 to 163 in electoral votes and 52% to 46% in the popular vote, with a couple of states still not reported) still tell different stories. Every presidential election we are reminded that it’s the electoral vote that really counts. It is, as history and pundits remind us, possible to win the popular vote and lose the electoral vote. Now, hold on to your comments, as I’m not trying to make any political statement here, and I know we’ve all had our fill of polls and graphs lately. I mention these numbers as an example of the cliché: it’s all in how you slice and dice the data.

I recently met with top level claims representatives from a major insurance company to discuss some issues related to their management of several injured employee cases. These are good people striving to do a good job. They do difficult work in a challenging system.

When it comes to claims management, insurance companies and employers are looking at the data in different ways.

However, during the meeting, it suddenly occurred to me why employers – and the agents who serve them – are often at odds with insurance companies over the way injury claims are handled. We’re looking at the data in different ways. Simply put, insurance companies frequently have different goals, objectives, and measurements than employers. I was at the meeting to discuss 9 individual injured employees. They came to the meeting to explain the workings of a system that handles 20,000 injuries a year.

Insurance companies’ key measurement for workers’ compensation injuries is something called the pure loss ratio. This is the percentage of the premium dollar that goes to pay for injury costs. For example, their goal might be to spend no more than 60% of premium dollars on injury costs. Add expenses to that percentage and what remains is their profit, not counting investment income.

From the insurance company’s perspective, if they meet their goal, then their processes are working. They see the work comp world from an aggregate view, while we’re looking at specific injured employees.

Some might suggest that if insurance companies are not effectively dealing with the specific, they will not meet their overall objectives. However, there are times, as is now the case, when they are saved by legislative reforms which drive down injury costs regardless of their processes. When doctors and lawyers get reigned in by the legislature, everybody looks smart. But as the saying goes, just because you are standing on third base, that does not mean you hit a triple.

The employer’s primary objective is for the injured employee to get the best medical treatment and to get back to health and productivity as soon as possible. The insurance company’s primary objective is to meet a number. If they attain their aggregate goal, then they are not as open to improving their processes.

Thus, it is up to the employer to make sure the employee gets what is needed and is not just a set of dates and numbers “sliced and diced” in the insurance company’s claims system. The incentives are not aligned such that the employer can abdicate this critical responsibility to insurance companies.

http://www.SpecificSoftware.com
http://www.WorkCompEdge.com

by Kory Wells, WorkCompEdge Blog Editor

Trick or treat, WorkCompEdge blog readers. In the spirit of Halloween, this week we offer some scary stories contributed by our staff. Some are true and some are imagined, but all illustrate concepts of which employers should beware. Can you tell which is which?

Of course, we think the scariest thing of all is an employer who doesn’t use WorkCompEdge!

Category 1: Do we really want this employee returning to work?

The employee who tried to siphon liquid chemicals with his mouth.

The skull and crossbones must not have been enough. Now there has to be a label that says
“use an approved siphoning device.”

The employee who instigated an assault that led to work comp claims for himself and another employee.

Talk about needing an improvement in corporate culture.

Category 2: They said that?

Employer: “What’s wrong with putting our gear machine operators in code 8810?”

8810 is the common code for office and clerical workers. A manufacturer classifying all employees in this category would probably be charged with, let’s see, falsifying business records and committing a fraudulent practice.

Employer, in incredulous tone: “That’s the sixth work comp claim this employee has made?”

Needless to say, they hadn’t been doing much with claims management.

Employer, on buying work comp insurance: “I went with the low bid.”

Cliches are usually true. You get what you pay for.

Employer, on buying work comp insurance the next year: “I don’t know why my premiums went up so much this year.”

It’s called experience rating. Your agent should be helping you understand it.

Agent to employer: “The mod? I really can’t explain it, but I know it’s better if it’s low.”

Time for a new agent!

Of course, we think the scariest thing of all is an employer who doesn’t use WorkCompEdge! But in all seriousness, whether you’re a member or not, take our Getting Started with WorkCompEdge quiz. It’s nineteen questions that will help you assess the areas in which your company may be getting tricked – and what WorkCompEdge modules you should treat yourself to first.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Frank Pennachio, WorkCompEdge Regular Contributor

I recently attended a safety conference sponsored by Occupational Health & Safety Magazine in the Washington, D.C., area. One of the more powerful presentations was conducted by Bob Krzywicki, North America Operations Leader with DuPont Safety Resources.

Safety is about more than programs, and measuring your safety culture is the first step in improving it. To view a WorkCompEdge video clip regarding safety culture, click this link

Most of the safety-oriented presentations I’ve attended over the years have focused on a traditional safety engineering approach, such as “find a hazard and remove the hazard.” Mr. Krzywicki, however, had a different approach. He challenged the audience to think about safety performance as a corporate culture issue. He said, “Safety excellence is a cultural transformation that requires felt leadership.” Felt leadership, as implemented at DuPont, establishes safety as a core business value, starts at the top of the organization, and is felt at every level of the organization through employee involvement and accountability. Read more about DuPont’s felt leadership in this article.

In addition, Mr. Kryzwicki said a safety leadership culture can be measured and improved.

He outlined three components of safety culture used at DuPont: leadership, structure, and processes and actions.

Each component includes four elements which he calls the “12 Gifts.”

Leadership elements include:

• Management Commitment
• Policies & Principles
• Goals, Objectives, & Plans
• Procedures & Performance Standards

Structure elements include:

• Line Management Accountability& Responsibility
• Safety Personnel
• Integrated Organization
• Structure Motivation & Awareness

Process and Actions elements include:

• Effective Communication
• Training & Development
• Incident Investigation
• Audits & Observations

Kryzwicki asked the audience to take a leap of faith and measure their safety culture and leadership performance with perception surveys of managers, supervisors, professionals, and hourly workers. DuPont studies show the better the safety culture score, the lower the number and severity of injuries.

Those of you who are very familiar at all with the content of WorkCompEdge will know that I delighted to hear of DuPont’s experience and certainly think it’s worth emulating. Although WorkCompEdge doesn’t express safety culture in quite the same components and elements structure that DuPont uses, we definitely subscribe to the same message: safety is about more than programs, and measuring your safety culture is the first step in improving it. WorkCompEdge members can start that process today using the survey included in the module Build True Safety Culture – It’s More Than the Incentive of the Month.

I am confident in DuPont’s findings and encourage employers to perform similar assessments of their own safety culture and performance now, before you attempt to polish any rough edges in the culture you may suspect exists. Although it may take some intestinal fortitude to digest the perceptions you uncover, particularly among certain segments of your employees, you need to establish a baseline of your current safety culture at all levels of your organization. Benchmarking is a critical first step to determining where you are so you can decide where you need to go.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Tim Coomer, Specific Software

If you don’t recognize the acronym “GFM,” never fear: I couldn’t resist throwing a new one out into cyberspace. AcronymFinder.com says GFM can stand for, among other things, “gaming FM (radio)”, “general field marshal,” and “global financial market,” but around the office we’re using it as a convenient way to refer to the current “global financial meltdown.” As a pilot and former rocket scientist, I find acronyms tend to lighten the subject at hand… terms such as MAD (Mutually Assured Destruction), BMDS (ballistic missile defense system), or one of my personal favorites CFIT (controlled flight into terrain) don’t seem quite as threatening if you only use the initials. So, GFM is a “lighter” way to refer to a situation that’s very serious indeed.

During this GFM, it’s important to remember that historically,  employees who are stressed about job security or have personal financial difficulties tend to file more workers compensation claims.

The past few weeks have been incredibly dramatic and sobering: I feel like my brain has been rewired and I’ll never see the world in the same way again. Many of our staff here are thankfully young enough that we have some time for our retirement funds to recover, but most of us also have concerns at a level we’ve never had before regarding the cost of children’s college educations, major purchases and investments of any type, etc. We’re hearing from our personal and business contacts that we’re not alone. So, I thought I would survey the WorkCompEdge team and share with you how we view the impact of the GFM on workers comp – for both employers and insurance agencies. Here are some thoughts from our team:

Employers

Employers should be alert for a possible increase in workers compensation claims. Historically, employees who are stressed about job security or have personal financial difficulties tend to file more workers compensation claims. To avert such a possible increase, we have these recommendations for employers:

• Be especially vigilant at this time about nurturing supervisors’ relationships with their employees, even when there may be negative news to report. Effective, proactive communication with employees is never more critical than now, when fear and rumors can undermine a company’s culture.
• Pay close attention to any claims that are filed: show care and concern for the injured employee. An injured employee is often under a lot of stress, but those stresses may have extra weight in this economy and therefore lead the employee into a downward, self-defeating spiral.
• Even if your business is off, don’t relax your return-to-work policy. For both the financial benefit to your company and the injured employee’s recovery, it’s paramount that you get employees back on the job in some capacity. A claim that is partially due to emotional stress or depression will be greatly exacerbated by sitting at home.
• Finally, this is a great time to reinvigorate or launch an employee wellness program. Get your workers walking at break time; hire a massage therapist for a special on-site chair massage day; make healthy snacks and decaf beverages available in your breakroom to ward off junk food binges some research suggests may be related to stress.

WorkCompEdge modules that are particularly applicable to the above points include:

• Before and After an Injury – The Crucial Role of the Supervisor’s Actions and Attitudes
• Expedite Return-to-Work – It’s Critical to Health, Morale, and Your Bottom Line
• Build True Safety Culture – It’s More Than the Incentive of the Month
• A New Paradigm – Promoting the Health of Your Workers

Agencies

Your employer clients may be hurting financially, but this may mean they’ll be open to new ideas that will make a difference. The coming months will likely be an excellent time to move away from “low bid” philosophies and demonstrate how WorkCompEdge can be an effective tool to lower costs. Use the “Learn the lessons” module to show the employer the potential savings that come with lower losses and a lower experience mod. Then, sit down with the employer and use the WorkCompEdge ModMaster report or the online survey to help map out a strategy for implementing WorkCompEdge.

It looks like we’re going to be dealing with a recession for a while. Ask yourself, “What do my employers clients need most in recessionary times?” We think that one answer is lower fixed costs and a healthy productive workforce – exactly what WorkCompEdge can deliver – but we’re very interested in hearing what you think. Through our products WorkCompEdge and ModMaster, how can we help you help them?

For All Our Readers

Whether you’re an employer, agency, or other insurance professional, it may be time to understand that the best investment you can make is in your own company and in yourself. We want to know how we can help you do that. What challenges do you think the GFM will bring to workers comp in the coming months?

Please, let us hear from you – on the blog comments or by email to me, Tim or our blog editor, Kory.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Nick Cunningham - WorkCompEdge and Specific Software Support

Blog editor Kory Wells and Specific Software CEO Tim Coomer are both on vacation this week. They told me I was in charge, so I thought we’d try something a little different while they’re gone. How about some audio for a change of pace?

Today, Jack Burke of Insurance Talk Radio…tomorrow Katie Couric, Charlie Gibson, Brian Williams…maybe even Letterman? Hey, WorkCompEdge is big…and in his interview of Specific Software CEO Tim Coomer, Jack calls it “a dynamite product.” Play the audio interview now

Jack Burke, president of Sound Marketing and host of the popular insurance programs “Audio Insurance Outlook” and “Insurance Talk Radio,” recently interviewed Tim about WorkCompEdge. Listen and hear them discuss:

• a brief history of Specific Software Solutions and SIGMA Actuarial Consulting Group
• why we built WorkCompEdge
• the community aspects of WorkCompEdge
• how we’re educating agencies about WorkCompEdge
• how the content of WorkCompEdge is geared toward employers but brings opportunities to agencies
• open enrollment and exclusivity options
• the cost of WorkCompEdge
• the value of WorkCompEdge
• the three main goals of WorkCompEdge
• the next step in learning more

WorkCompEdge has both a wide scope and a lot of depth. Jack calls it “…a dynamite product,” and says there’s “definitely a need for it in the marketplace.” Whether you’re new to WorkCompEdge or still evaluating it, I think this interview will help you learn about it in a new way.

Play the audio interview now

http://www.workcompedge.com/
http://www.specificsoftware.com/

by Tim Coomer, Specific Software

I recently had the opportunity to review the WorkCompEdge site with the risk manager of a large corporation. It was a fascinating conversation because he had extensive experience, possessed an analytical mind (I’m partial to those), and could tell a story related to every topic within WorkCompEdge. But, for this blog, I wanted to share with you one particular insight I gained from this meeting.

If your “defense system” lets 100% of your potential new hires through, you need to be concerned.

In the Avoid Hiring Your Next Workers Comp Injury module, we discuss the importance of the post-offer, pre-employment medical screening. Bob (not his real name) shared his experiences with this method for preventing a new hire from quickly becoming your newest work comp claim. Bob verified what we thought when we developed this module: he had definitely seen situations in which an effective medical exam program made a dramatic impact on the frequency of work comp claims and resulted in verifiable long term significant savings. But, just as importantly, he had also seen cases in which the effort to screen out candidates with preexisting conditions or physical ailments or limitations was NOT effective.

This got my attention, of course. I asked Bob, “How can you tell in the early stages of a medical screening effort whether or not it’s effective?” His answer, in retrospect, makes so much analytical sense that I’m almost embarrassed to admit I hadn’t thought of it! “Look at the reject rates, “Bob said. “If you’re passing 100% of the candidates, you have a problem.”

This reminded me of a challenge from my days of working in the defense industry. A ballistic missile delivers a number of decoys and a number of actual weapons to a target. A defense system must determine which of the missile’s reentry vehicles (RVs) are real threats and which ones are not. It can’t identify everything as a threat but it also can’t decide nothing is a threat. If your defense system lets everything in, you know you have a problem! The same principle applies to the medical screening of potential new employees. If your “defense system” lets 100% of your potential new hires through, you need to be concerned. Especially in a challenging labor intensive industry, you can expect to hear a very loud boom in the near future.

So, do you know the percentage of rejects that occur with your medical screening effort? If you have multiple locations across your state or across the country, how do the reject rates compare? Does this correlate to the level of work comp claims by location? If work comp claims are particularly low in a specific location and medical rejects are high, perhaps you need to model that screening or defensive system at your other locations. What do you think? Let us know with your comments.

http://www.workcompedge.com/
http://www.specificsoftware.com/

by Frank Pennachio, WorkCompEdge Regular Contributor

Much has been written about the decline of the frequency of workplace injuries over the past 15 plus years. Improved workplace safety, modular construction, cordless tools, and reductions in heavy manufacturing are some of the most popular reasons attributed to the decline. 

On the surface, this sounds like a positive thing. But upon further examination, this much-celebrated decline in the number of workplace injuries may not be completely legitimate.

Does it make sense that delays in getting prompt medical care are often increasing the treatment requirements – and therefore the cost – of injuries? Increased rates of surgery and physical therapy are contributing to increased loss severity.

The June 2008 report to Congress by the U. S. House of Representatives Committee on Education and Labor, “Hidden Tragedy: Underreporting of Workplace Injuries and Illnesses,” states that work-related injuries and illnesses in the United States are chronically and even grossly underreported.

According to the report, “as much as 69 percent of injuries and illnesses may never make it into the Survey of Occupational Injuries and Illnesses (SOII), the nation’s annual workplace safety and health “report card” generated by the Bureau of Labor Statistics (BLS). If these estimates are accurate, the nation’s workers may be suffering three times as many injuries and illnesses as official reports indicate.”

What are the causes of underreporting? According to experts:

• OSHA’s reliance on self reporting by employers. Employers have strong incentives to underreport injuries and illnesses that occur on the job.
• Twenty percent of workers— including public employees in high-risk jobs such as law enforcement, fire protection, and public works; workers on small farms employing less than 11 employees; and those who are self-employed—are not even counted by BLS.
• Work-related illnesses are difficult to identify, especially when there are long periods between exposure and illness, or when work-related illnesses are similar to other non-work-related illnesses.
• Recent changes in OSHA’s recordkeeping procedures have affected the accuracy of the count of musculoskeletal disorders (MSDs).
• Some employers are confused about reporting criteria and OSHA staff are often not well-trained to provide accurate advice.
• Workers report widespread intimidation and harassment when reporting injuries and illnesses. Immigrants are also less likely to report, as explored in last week’s blog entry by Bill Wilson.
• While they may be well-intentioned, widespread and popular safety incentive programs which provide awards for a period of time without a recordable injury, can have the effect of putting pressure on workers not to report their injuries.

Here’s what I’d like your ideas about: Do you think it’s possible that underreporting of injuries may be one of the causes of the increased severity of the injuries that are reported? In other words, are employees resistant to report an injury, and only do so when they can’t stand the pain any longer? If so, does it make sense that delays in getting prompt medical care are often increasing the treatment requirements – and therefore the cost – of injuries?

A report published just a few days ago by NCCI presents an interesting analysis of claim severity as related to the “growth in treatments per claim” over recent years. This report shows that significant contributors to increased claim costs are increased rates of surgery and physical therapy. Catastrophic injuries aside, of course, doesn’t it make sense that the longer you defer medical attention for a problem, the more likely you may need surgery and/or extensive physical therapy?

Here are just a few of the WorkCompEdge modules that relate to this topic.

• The Clock is Ticking – Things You Must Do in the First 24 Hours After an Injury
• Before and After an Injury – The Crucial Role of the Supervisor’s Actions and Attitudes
• Build True Safety Culture – It’s More Than the Incentive of the Month

Ultimately, it’s in the best interest of the employer and the injured employee to report all injuries promptly and get immediate medical treatment. It’s essential for the employer to create a culture that fosters the reporting of injuries. Education and communication is the key. Get the message out loud and clear: if you get hurt, report it. The company, the injured employee, and the employee’s family will all benefit from reporting all injuries. It’s the right thing to do – and it may cost us all less in the long run.

http://www.workcompedge.com/
http://www.specificsoftware.com/

by Bill Wilson, Director, IIABA Virtual University

One of the few email discussion lists I participate in is a Yahoo! Groups list called “RiskList.” Recently, the topic of discussion was illegal aliens and workers compensation. Some issues discussed include whether or not these workers are covered under workers compensation laws and what kind of impact they may be having on loss experience.

Immigrant workers may be more inclined to take risks not commensurate with their skill levels. In cost-cutting measures that played a role in their hiring to begin with, they also may not receive proper safety equipment.

This blog is an abbreviated version of a longer article available to WorkCompEdge members here on our wiki. This article addresses the issue of whether or not illegal aliens are entitled to benefits under state workers compensation laws. The purpose is not to opine about the situation from a political or social standpoint, nor to comment on construction workmanship issues that have been addressed in the press.

Of 9.3 million illegal adults in this country, 7.2 million (77%) are employed and comprise about 5% of the entire U.S. workforce. However, they comprise a far more disproportionate percentage in some industries, such as 24% of farm workers, 17% of cleaning workers, 14% of construction workers, and 12% of food preparers. Within an industry, illegal workers may comprise high percentages of specific (often more hazardous) occupations…e.g., 36% of all insulation workers and 29% of all roofing employees are estimated to be illegal aliens. In general, illegal workers tend to be younger than other workers.

Because of language barriers and lack of training and experience, some experts believe that the exposure to injury may be significantly greater for illegal aliens than other workers. According to an Associated Press story, Mexican workers are about 80% more likely to die from a work injury than native-born workers. In several Southern and Western states, these workers are four times more likely to die than U.S. citizens performing similar jobs.

Given language barriers that might interfere with effective supervision and training, along with the frequent lack of experience, there is a fear that illegal aliens may be at greater risk due to several additional compounding risk factors. For example, because of the reasons many are here, they might be more inclined to take risks not commensurate with their skill levels. In cost-cutting measures that played a role in their hiring to begin with, they may not receive proper safety equipment. And, because they are inclined to avoid attention being directed at their illegal status, they may be hired or assigned to more hazardous jobs by employers who feel they are far less likely to file workers compensation claims….

….which brings us to the topic of this article, which is to answer the question, “Are illegal aliens entitled to state workers compensation benefits?” The short answer to this (as often the case with insurance coverage questions) is, “It depends.” In a significant majority of states, illegals ARE entitled to workers compensation benefits. However, this is not true in every state. In addition, the types of benefits or extent of coverage may be restricted in some states depending on a number of factors.

The arguments for and against benefits are further discussed in the full article (available to WorkCompEdge members). Whether or not an illegal alien is entitled to workers compensation benefits will be established in the state statutes or by regulatory or court decision. Are illegal aliens “employees” as defined by most state statutes? If so, are they entitled to all or some of the statutorily-prescribed benefits? In trying to answer these questions, I’ve constructed a state-by-state chart that references each state’s statute, lists any known case law or regulatory ruling, and provides commentary on whether or not it is likely that illegals are entitled to benefits:

Workers Compensation and Illegal Aliens Chart (Word document format)

As you’ll see on the chart, most states do allow illegal aliens to claim workers compensation benefits. The only state that expressly excludes benefits by statute is Wyoming. The only state that has excluded benefits across the board by court decision was Virginia, but the decision was subsequently overridden by legislation. The vast majority of other states permit at least the claiming of medical benefits by illegals. Some states (e.g., Georgia, Michigan, and Pennsylvania) attach restrictions to disability benefits. Other states (e.g., California, Nebraska, and Nevada) limit or preclude vocational rehabilitation benefits.

This chart is a work in progress, so information is not currently available for all states, but it is for most. Also, keep in mind that where case law is absent (to the best of our knowledge), any opinion about how statutory law might respond is conjecture on our part, based on how courts in other states have ruled on similar statutory wording. As statutes are reviewed and case law uncovered, this chart will be revised on an ongoing basis. If you are aware of any inaccuracies or missing information, please email corrections to me at mailto: Bill.Wilson@iiaba.net.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Tim Coomer, Specific Software

Editor’s note: Today we’re returning to our “regularly scheduled programming” after blogging yesterday about our award. Next week we’ll return to our once-weekly blog schedule.

Sarah Palin was a wildcard choice…is wellness a similarly unexpected consideration in workers comp issues? Photo from the Wikimedia Commons.

Hold your rants or raves! We’re not veering into political territory on this blog; I just can’t pass up a good analogy. Republican, Democrat or other, almost everyone agrees that Sarah Palin was a wildcard choice as a vice presidential nominee. Now, as I think about Kory’s comment in last week’s blog about whether the WorkCompEdge wellness module will be largely ignored by our members, I have to acknowledge that we made our own surprise selection when we included it in the lower left hand corner of the process diagram on the WorkCompEdge home page.

We tagged the module, “A new paradigm – promoting the health of your workers.” Was including wellness in WorkCompEdge a good idea? Does it complement all of the other modules, or was it just some crazy late night selection we made to stir things up? Well, as with McCain/Palin, only time will tell. But, let me explain some of the challenges we have discovered with wellness in the workplace.

I love business. I love systems. And, I really love math. I can relate to the process thinking and math behind the various modules and strategies within WorkCompEdge. The content we developed, the tools that we provide, and the implementation plans we suggest were carefully derived from the experiences of successful employers. Wellness is similar to the other modules in that it can involve numbers on both the corporate and personal levels (How many of your employees smoke? How much weight has John Doe lost?). But wellness won’t succeed based on analysis and corporate process improvement. More so than with any other program or module in WorkCompEdge (safety, claims management, supervisor training, medical relationships, etc.) wellness involves individual, self-initiated change.

We developed the wellness module easily, given our in-house health gurus and the wealth of external resources available. But will employers use it? And what can make it most effective? As a broker in St. Louis recently explained to me, wellness is about “boots on the ground.” That is, real change in individuals takes internal motivation that is often ignited and fueled by a wellness “foot soldier” – an everyman/everywoman type of health champion who inspires and leads individual employees to a better and more consistent lifestyle.

So, how does a nationwide program like WorkCompEdge put those boots on the ground? Not easily. But, let’s think outside the gym, so to speak. Can we provide the tools, techniques, and resources to train the champion? What if the WorkCompEdge focus for wellness becomes an effort to identify, train, and motivate that champion at each WorkCompEdge employer? What would this look like? Could it work? What if… we created an army of WorkCompEdge wellness foot soldiers committed to leading their organizations to a higher level of wellness, one individual at a time?

Like McCain’s choice of Palin, some may argue that wellness works for the WorkCompEdge Process and is an excellent pick. Others may think we are crazy! Let me know what you think (about wellness, not about the political campaign). And be keeping an eye out for who you might tag in your office to champion this cause. I can’t resist saying: this person doesn’t have to be a hockey mom, and lipstick will be optional!

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Kory Wells, WorkCompEdge Blog Editor

When we learned this week that LexisNexis has named the WorkCompEdge blog among the top 25 workers’ comp blogs of 2008, we had the urge to gush like actress Sally Field in her well-known, often-parodied Oscar acceptance speech of 1985: You like us, you really like us!

LexisNexis has named the WorkCompEdge blog among the top 25 workers’ comp blogs of 2008. Read the announcement or visit the LexisNexis Workers’ Compensation Law Center.

In its news release, LexisNexis stated that the top 25 blogs were selected for “a wealth of information for the workers’ compensation community with timely news items, practical information, expert analysis, tips, frequent postings, and helpful links to other sites. These blogsites also show us how workplace issues interact with politics and culture. Moreover, they demonstrate how bloggers can impact the world of workers’ compensation and workplace issues.”

We’re doing all that?

Well, we are trying to, and we’re delighted that, in the short life of this blog, folks have already noticed. But that brings us to what dear old Sal really said that night at the Oscars:

“…you like me, right now, you like me!” (Emphasis is ours.)

Right now.

In other words, Sally implied, the tide of cultural favor can go in and out, as do the opportunities to earn that favor. We recognize that fact here at WorkCompEdge, and this is a good time to remind you that:

• we’re committed to making not only the blog, but the entire WorkCompEdge site a “living” product that undergoes changes and enhancements in response to member needs, suggestions, and the changing market
• we need your ideas and feedback to make both the blog and the site thrive. (Well, actually, if you’re a member, we need your money every now and then, too. But right now we’re talking about valuable content.)

We’re very grateful for comments here on the blog and for those you’ve given to our staff by email and phone. Even if you tell us something you think we might not want to hear, be assured we have open minds. We know from our 20 years of developing and supporting ModMaster software
that your input leads us to create a better product.

Now, we’d still like to increase our readership of this award-winning blog, so please, consider forwarding this page to your colleages, state associations, professional groups, and clients. Tell them that subscription options are at the bottom of the page. And like Sally said, do it right now.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Kory Wells, WorkCompEdge Blog Editor

Wellness is one of the 15 modules we chose to include in WorkCompEdge. To be honest, at this point in the young life of the site, we sometimes wonder if it may ultimately receive the award of “Module Most Likely to Be Ignored by Our Members.” After all, it seems that everyone is talking about wellness in the workplace, so isn’t everyone already doing it?

This is a great way to get a little friendly competition started at the office. Who can raise the most money working out for CARE? Be sure to tell a friend or co-worker!

Well…maybe not. Although a quick Internet search will yield statistics supporting widespread corporate wellness programs faster than you can tie your walking shoes, the feedback we have so far from our recent survey (which is still open, please participate it you haven’t) doesn’t agree:

• Brokers and agents indicated that only “very few” or “some” of their clients had an effective wellness program 75% of the time. “Very few” was equated to 0-19% of their clients, and “some” was equated to 20-39% of clients.
• Of employers who responded to the survey, 66% reported that their company did not have an effective wellness program.

We think that part of the discrepancy between our results and others must be related to a company’s number of employees. It seems that a lot of the statistics we see mention “leading corporations.” It makes sense that smaller employers may find it more challenging to implement a wellness program. (Unfortunately, our survey didn’t capture number of employees. We’ll be smarter about that next time.)

But we also wonder if the key word in our question was “effective.” Are there a lot of wellness programs out there that are being offered, but just aren’t being used?

We recently came across an article that indicated some small businesses are motivated to offer a wellness program not so much because of the possible financial benefits (realized from fewer sick days, quicker recoveries, reduced health insurance premiums, better productivity, etc.) but simply because it’s a positive thing to do for their employees. And that resonates with us. Your own personal wellness is a gift – not only to yourself, but to your family, friends and colleagues. And now it can be a gift to the world’s poor.

Fitness expert, author and professional triathlete Eric Harr has implemented a program at CARE, the humanitarian organization dedicated to reducing global poverty, which will take your workout to a new level. For every hour you exercise and log on the website, Eric’s going to donate $5 to CARE. You simply fill out a brief form on the website, and you’ll receive an encouraging email and a monthly summary of your progress. AND, if you’re not already in a fitness program – or want to infuse your existing one with some new routines – Eric has what you need in free downloads, including a fitness assessment, 18 goal-specific training programs, and stretches.

How’s that for motivation? Head on over to the CARE site now, at www.care.org/workout

This ia a great way to get a little friendly competition started at the office. Who can raise the most money working out for CARE? Be sure to tell a friend or co-worker!

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com

by Tim Coomer, Specific Software

True confession time: we’re a bunch of nerds here at WorkCompEdge.com, Specific Software Solutions, and SIGMA Actuarial Consulting Group. And, as CEO, I suppose there’s a little pressure on me to be the nerdiest of us all.

…moving your company toward the minimum mod rivals rocket science…”

That’s not a bad assignment! I like numbers, and I’ve had the opportunity to use my mathematical education in various analytical disciplines – on everything from top secret “star wars” modeling of ballistic defense systems to complex financial models in the automotive finance industry. I’ve seen math applied to support decision making in many industries and situations – often resulting in decisions that were excellent but far from intuitive.

So that background brings me to this question: how in the world do employers pick a work comp coverage provider by looking at just one number? Price, of course, is the number I am referring to.

Work comp is a complex system. Injury prevention, injury management, and moving your company toward the minimum mod rivals rocket science – and I can say that since I’ve done rocket science!

“So Tim,” you might ask, “if price isn’t the number I should be looking at to make a work comp insurance purchase, what is?” That number, I suggest, is your total cost of risk. At WorkCompEdge, we think that when you purchase insurance, you need to do two things:

• know your total cost of risk, and
• have a goal – not to buy the cheapest coverage you can find, but to engage with a business partner who will help you change your company processes to move your company to the minimum mod and the minimum premium.

This is important not only for the long term costs savings but for the many ways in which your business will improve as a result.

Within WorkCompEdge we have derived our own unique expression of the total cost of risk as follows:

The WorkCompEdge TCORW = (LR + PM + PC + PA + R + S + C + F) + (LI * 2.5)

In this formula, the direct costs include:

LR = Retained losses
PM = Minimum insurance premium
PC = Controllable insurance premiums due to the controllable mod
PA = Estimated premium adjustments
R = Risk administration allocated to workers compensation
S = Outside services related to workers compensation
C = Collateral requirements (applicable for deductible programs) related to workers compensation
F = Fees and taxes related to workers compensation

This formula also includes indirect costs of workers compensation, which have been estimated by a variety of institutions, including OSHA, to be anywhere from 1 to 20 times the cost of a loss. Some formulas for the total cost of risk exclude indirect costs because of the inherent difficulty in determining an accurate value. For the WorkCompEdge total cost of risk value, our actuarial group, SIGMA Actuarial Consulting Group, analyzed available data across a broad spectrum of industries to determine an estimate of indirect costs. This estimate is simply:

Indirect Costs = 2.5 * LI

where LI = The total incurred loss amount for the period analyzed

In many cases, this formula will underestimate the indirect costs. However, here at WorkCompEdge, we decided that some measure of the indirect costs of workers compensation losses is a critical portion of the overall equation.

The purpose of knowing your total cost of risk is to see the long term impact on this number in different scenarios. The goal is to minimize this number. Buying the cheapest insurance is not likely to result in reaching your minimum total cost of risk. Working with an agent and insurance company that supports your effort to implement WorkCompEdge-type strategies will launch your company (pun intended!) toward minimizing your total cost of risk over the long term.

If you’re a WorkCompEdge member, be sure to look at our Avoid low bid mentality module for more about this topic, including a handy-dandy workbook to help you calculate and play what-if scenarios with your total cost of risk.

http://www.WorkCompEdge.com
http://www.SpecificSoftware.com