Financial Impact of Work-Related Injuries Presented by: The Rollins Agency, Inc.
Today s Agenda Promoting Safety OSHA Penalties Uninsured Cost of Loss Experience Modification Factor Workers Compensation Pricing Programs Summary Your Return on Investment In the Workplace Safety Index, Liberty Mutual estimated that employers pay almost $1 billion per week to injured employees and their medical care providers. Even one serious workplace injury may affect the bottom line of a small business. Employers that implement effective safety and health management systems may expect to significantly reduce injuries and illnesses and reduce the costs associated with these injuries and illnesses, including workers compensation payments, medical expenses, and lost productivity. In addition, employers often find that process and other changes made to improve workplace safety and health may result in significant improvements to their organization s productivity and profitability.
Promoting Safety Top 5 Goals of Promoting Safety 1. Bring safety out of the back room and into the boardroom. 2. Change employee health and safety from reactive to proactive by establishing a safety culture. 3. Make safety an enterprise value, not just a cost center. 4. Remove subjectivity; use objective tools to quantify. 5. Compete successfully for limited budget dollars. Minimizing loss is as much improvement as maximization of profit. Louis Allen, Risk Management Expert
Promoting Safety Traditional Approach It s the right thing to do People are important Safety improves productivity and quality We need to consider OSHA regulations and penalties Workers Compensation costs have to be controlled All true statements, but also consider the value of metrics
Promoting Safety The Value of Metrics Through metrics, we are able to make a true business decision regarding safety What gets measured gets managed We can successfully quantify safety using the tools presented today, such as utilizing the Safety Budget Worksheet
Promoting Safety The Safety Budget Worksheet allows us to develop a reference point for: Cost-benefit analysis The value of prevention But a word of caution: As we use metrics to support safety initiatives, we still need to be mindful of the ethical importance to protect human beings.
Promoting Safety Adopt a Safety Philosophy Working safely requires solid job knowledge, effective supervision, and disciplined, alert work execution. Maintaining this excellence over an extended period of time is the mark of a superior organization. It is more than not getting someone hurt, it is a command of the business you are engaged in. Robert C. Olsen Production Manager, EPMI
OSHA Penalties OSHA s View on Penalties General Policy. The penalty structure provided under Section 17 of the Act is designed primarily to provide an incentive toward correcting violations voluntarily, not only to the offending employer, but also to other employers who may be guilty of the same infractions of the standards or regulations. a. While penalties are not designed primarily as punishment for violations, the Congress has made clear its intent that penalty amounts should be sufficient to serve as an effective deterrent to violations. b. Large proposed penalties, therefore, serve the public purpose intended under the Act; criteria guiding approval of such penalties by the Assistant Secretary are based on meeting this public purpose. (See OSHA Instruction CPL 2.80.) c. The penalty structure outlined in this section is designed as a general guideline. The Area Director may deviate from this guideline if warranted, to achieve the appropriate deterrent effect.
OSHA Penalties Willful Minimum: $5,000 Maximum: $70,000 Repeated Maximum: $70,000 Serious, other than serious, or other specific violations Failure to abate OSHA PENALTY SCHEDULE Violating posting requirements (failure to post OSHA poster, OSHA 300 Annual summary, citations, etc.) Failure to report fatality or catastrophic event within eight hours Providing advance notice of inspection Maximum: $7,000 Maximum $7,000 per day for each day violation continues beyond abatement date Maximum: $7,000 Maximum: $7,000 $1,000 fine or up to six months in jail or both
OSHA Penalties Gravity Based Penalties (GBP) An unadjusted penalty is based on severity and probability. GBP may be reduced due to: Good Faith Size of Business History of Previous Violations
OSHA Penalties Penalty Adjustment Factors No adjustment given if any violation is classified as willful Small business adjustment stops at 250 employees No adjustments given in the absence of a written safety and health program (could be required under Draft Proposal Safety & Health Program Rule, 29CFR1900.1)
Uninsured Cost of Loss The Tip of the Iceberg $1 Insured Costs Medical Compensation Uninsured Miscellaneous Costs $4 to $10 Investigation time Uninsured Property Damage Costs Building Damage Tool & Equipment damage Product & Material Damage Production delays & interruptions The Real Cost of Accidents Can Be Measured and Controlled Cost of hiring and/or training replacements Overtime Extra supervisory time Clerical time Wages not compensated Down time Negative public image Legal fees Reduced Employee Morale
Uninsured Cost of Loss - Injury example Employee suffers serious arm laceration four hours into shift: Misses work three days Two follow-up visits for observation/therapy Clinic is about 15 minutes away Employee wage rate - $10/hour Supervisor wage rate $20/hour Back to work on Light Duty restrictions Restrictions last for 10 days Injured Employee: Lewis Laceration DOL Dispensary Only Outside Medical Lost Time Case WAGES 1. Injured EE time (Not covered by WC) Rate: $10.00 X Hours: 30 = $300.00 2. Medical visits while on light duty..rate: $10.00 X Hours: 4 = $40.00 3. Decreased productivity while on light duty..rate: $10.00 X Hours: 20 = $200.00 4. Employee(s) giving aid...rate: $10.00 X Hours: 3 = $30.00 5. Employees watching, discussing # EE s: 6 X Rate: $10.00 X Hours: 2 = $120.00 6. Supervisor/Mgr Investigating & Reporting...Rate: $20.00 X Hours: 3 = $60.00 7. Supervisor rescheduling/training.rate: $20.00 X Hours: 2 = $40.00 8. Office: Preparing reports & managing case.rate: $10.00 X Hours: 1 = $10.00 9. Reactive Safety activities..rate: $- X Hours: - = $50.00 10. Overtime required # EE s: 1 X Rate: $10.00 X Hours: 20 = $200.00 11. Other..$0 SUBTOTAL..$1,050.00 OTHER COSTS 12. Medical Paid by employer $- 13. Clean up cost.$55.00 14. Transportation Expense...$25.00 15. Production decrease/downtime $150.00 16. Product or equipment loss...$- 17. Replacement of first aid supplies $10.00 18. OSHA penalties.$- 19. Deductible..$- 20. Miscellaneous overhead..$- 21. Other $- SUBTOTAL $240.00 22. Total Uninsured Cost..$1,290.00
Uninsured Cost of Loss Utilizing the Uninsured Cost of Loss worksheet, we can help you identify areas for consideration and improvement.
Experience Modification Factor Overview Benchmark tool used to compare actual losses to expected losses 1.00 is average Lower than 1.00 is better than average Higher than 1.00 is worse than average Measures dollars, not number of claims Based on a rolling three years Used as a multiplier for premium calculation
Experience Modification Factor Estimating a mod Compare claims for the year dropping off with the year coming on. The estimate will be skewed if the claims in either year had one very large claim or if payrolls were significantly different. 2009 Mod - Factor 2005 Claims $35,238 2006 Claims $84,472 2007 Claims $100,393
Experience Modification Factor Financial impacts of controlling the mod: If the mod is consistently low, there s a quantifiable financial benefit to keep it from going up. If the mod is consistently high, there s a quantifiable financial benefit to bring it down. Potential savings could pay for a safety facilitator. If the mod has fluctuations, smoothing it out at a lower level would relieve some budgetary frustration.
WC Pricing Programs Workers compensation rates are priced in one of three ways: 1.Monopolistic states: State-run WC programs 2.Price-administered states State establishes WC rates Dividends payable post-expiration 3.Competitively rated Each insurance carrier establishes rates by using credits or debits
WC Pricing Programs Guaranteed cost most typical Dividend plans - state specific Retrospective (Retro) plans Self-insured suited for large employers Deductible suited for large employers, varies by state
Agenda Selling Safety OSHA Penalties Uninsured Costs Experience Modification Factor Workers Compensation Pricing Programs Summary Your Return on Investment
Summary Return On Investment The bottom line? Savings! By focusing on the following: OSHA compliance Managing uninsured costs through safety initiatives Controlling your experience modification through a proper safety program Building a Safety Culture You will be able to obtain the most attractive WC pricing program, resulting in a bottomline return on your investment!
Summary Return on Investment We have the loss control experience and programs to help you manage and reduce the financial impact of workrelated injuries! The Rollins Agency, Inc.
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