By Robert Tuman, CCR Safety Consulting

In my almost 40 years as a risk manager and safety consultant, I was privileged to work with contractors who over time succeeded in lowering their experience modification rates, resulting in lower workers’ compensation premiums and more favorable treatment when bidding work.

Whether it is right or wrong, owners judge contractors on the basis of their experience modification rates, and I recall a concrete contractor client which was disqualified from even throwing its hat into the ring on a $10 million contract due to its 1.17 experience modification rate- 12 points above the owner’s and General Contractor’s 1.05 experience modification rate cutoff. The owner questioned the disqualification, but was denied an appeal.

SO…HOW CAN YOU IMPROVE AND LOWER YOUR EXPERIENCE MODIFICATION RATE (“EMR”)?

1. Ask your agent about experience modification rating and the adverse impact of injury and illness claims, and especially the impact of claim reserves on experience modification rates. Many agents possess software programs which can forecast future experience modification rates and premiums based on current claim costs, claim reserves, and other variables such as payroll and class codes. Workers’ compensation insurance is experience-rated similar to auto insurance surcharges following at-fault events and accidents- i.e. conviction for turning on a “NO TURN ON RED” sign, rear-ending another vehicle, driving while intoxicated. Simply put, workers’ compensation claims, with reserves to pay for “what ifs”, increase EMRs and premiums in each of the 3 years following the claims. Even denied claims can impact your EMR. For example, a contractor’s EMR tripled due to a $250,000+ reserve put on a death claim. The owner’s brother, responding to a weekend emergency, was killed in a head-on collision while driving to the jobsite. The insurer denied the claim, which a judge overturned 3 years later. Another client, a medical laboratory, experienced a dramatic increase in its EMR and workers’ compensation premium when a lab tech claimed that she contracted tuberculosis from handling tuberculosis-tainted blood two and one-half years after she had left the laboratory. The very thorough but time-consuming investigation found that she had contracted tuberculosis after moving near the prison where her boyfriend was incarcerated and had contracted tuberculosis. 
2. Regularly obtain and review workers’ compensation “loss runs” from your agent. A loss run is a detailed accounting of claims costs- for medical treatment, income-replacement payments to injured workers, reserves, and claim-related expenses such as accident investigation and loss control consultation. Reserves are essentially an escrow account the insurer establishes to fund “what ifs”: “What if the injured worker needs surgery and lengthy physical therapy?” “What if the worker can’t return to her or his chosen occupation, and requires job retraining?” “What if the worker is permanently and totally disabled and can’t ever work again?” Insurers report what they have paid and what they have reserved to their states’ workers’ compensation rating and inspection bureaus, which then calculate experience modification rates for the following policy year. KEEP IN MIND THAT THE AMOUNT OF A RESERVE, WHETHER ANY OR ALL OF IT HAS OR HAS NOT BEEN SPENT, IS FACTORED INTO THE BUREAU’S CALCULATION OF EXPERIENCE MODIFICATION RATES. Due to experience rating, regularly reviewing loss run detail is as important as reviewing your company’s sales reports, expenses, income statements and balance sheets. Make believe you are self-insured for workers’ compensation- that every dollar spent by your insurance company is coming out of your current revenue. Accordingly, it is perfectly reasonable for you to ask adjusters “How did you come up with this reserve?” “Do you need this amount of (reserve) money, given that our employee is back to modified duty and doing well?” “Our employee is back to modified duty. Can you reduce the reserve?” “Our employee has stopped treating and is back to full duty. Can you close the claim?” “What is your plan to resolve this claim?” “Why did you accept (or deny) this claim?” All are reasonable questions. 
3. Given that you now have claim details, regularly communicate with adjusters to obtain claim updates. Claims evolve, and you want to know how they evolve- for the better or for the worse.
4. Implement an ACTIVE/PROACTIVE Early Return to Work Program where you maintain contact with your employee: “How are you feeling? Is there anything we can help you with or do for you? We have a job for you when you’re ready. Here’s what it entails. You can start with a few hours. We’re having a retirement/birthday/holiday party on….- how about joining us?”. PLEASE BE AWARE THAT CLAIM COSTS INCREASE AS LONG AS INJURED EMPLOYEES CONTINUE TO BE  OUT OF WORK AND THAT WORKERS’ COMPENSATION ADJUSTERS HAVE NO CHOICE BUT TO INCREASE RESERVES IF THEY SEE THAT THERE IS NO END IN SIGHT. It is therefore incumbent on you, and in your and your injured employee’s best interest, to get her or him back to suitable, productive work, even it is part-time, as soon as medically possible. To company Presidents and senior managers: If you were injured and could not work for weeks or months, what would you like your company to do for you? The active/proactive approach includes contacting your employees’ medical providers to develop suitable modified duty jobs, and to modify these “light duty” jobs to accommodate the employee’s capabilities and restrictions. The ineffective passive approach relies on the employee’s doctors telling you what their patients are capable of doing. However, most of the time the doctor is going to detail what the employee CAN’T do. How many times have you seen doctors’ reports which state “can’t lift more that … lbs., can’t reach, can’t climb ladders…can stand for a maximum of ….minutes per day?” Come up with jobs and tasks which need to be done but you are not currently doing and put them in a job description which you then send to your employee, her or his doctor, and the insurance adjuster. If the doctor thinks the jobs or tasks will or might aggravate the patient’s condition, modify the “light duty” job and job description and send it back to the doctor, with a cc your employee and the insurance adjuster.  
5. Do a better job of screening applicants. Risk management starts with applicant screening. Ask yourself: Do you check references? FYI, after a reference spouts numerous superlatives about her or his former employee, ask “What is the worst thing you can say about ….?”. When I asked this question about a woman I had interviewed for an administrative position, her former employer told me “She has a hard time getting along with co-workers.” I did wind up hiring her, as her positives were more than her negatives. However, after a year we agreed to disagree, as she did have a very hard time getting along with co-workers. She was a good, but not a great individual contributor, but she created friction, dividing and polarizing staff. Try having several (no more than 4) valued, veteran employees and managers interview applicants and then conduct “What did you think of the applicant?” sessions. This will help you to get different and helpful viewpoints. Ask applicants to demonstrate the competence they claim they have- i.e. operating equipment, ability to read and understand plans, their knowledge of safety- i.e. scaffold safety- especially if they listed relevant experience and knowledge on their applications or resumes. Not necessarily relevant to your line of work, but when interviewing secretarial applicants, I asked one to take a typing test. Her resume stated that she typed 60 words per minute. She said her glasses were in her car, and asked if she could get them. 5 and 10 minutes went by. Where was she? Long story short- she never came back. Perform as many legal background checks as possible. Risk management RULE 1: the more risk-lowering actions you take, the lower the probability of those risks and injury and illness exposures rearing their ugly heads. AND RISK MANAGEMENT STARTS WITH CAREFUL APPLICANT SCREENING. 
6. Develop, implement, and execute a legal policy and procedure which enables you to quickly terminate employees who have misrepresented their skill level, competencies, and are under-performing and/or not meeting the documented expectations you and the new hire agreed on. The expectations should include a safety section- i.e. “We require the following Personal Protective Equipment”. If I had a nickel for all the times I heard a client say “I should have gotten rid of her/him sooner”, I would have amassed a lot of nickels. Often this statement followed unwitnessed accidents and very questionable costly and contentious workers’ compensation claims. Question: what do you think of a claim submitted after you fired the employee? 
7. Understand your biases and hit the delete button to remove them from your head. Every applicant screening process should start with a clean slate. Worst case personal example: I was wowed by an applicant who appeared in a suit and tie, was the breadwinner of a family of four, owned his home, was a licensed insurance agent in his family’s insurance agency, and said all the right things. I contacted references, asked “What is the worst thing you can say about Joe?”, with references replying “I don’t have anything bad to say about Joe”. During his new employee  orientation, I detailed my expectations, which included receiving a copy of Joe’s schedule at the beginning of each week along with an activity report detailing the previous weeks’ safety meetings, safety inspections, and other activities. A few weeks into the job, we started getting calls from clients: “Where’s Joe? He was supposed to be at our safety meeting at 11 but never showed up and never called.” Enough noise to cause me to be suspicious and to start documenting these complaints. Further, one morning, while driving back to my office, I spotted Joe’s company car speeding past me and other vehicles and weaving in and out of traffic. Waiting for me back at the office was an urgent request from my insurance agent: call me right away. Back then, Massachusetts assigned numerical scores to driving records. For example, a 9 indicated a perfect driving record. Drivers with at-fault violations were charged additional points. The reason behind my agent’s urgent request: to tell me that Joe’s score was 36, a result of 19 speeding tickets, at-fault accidents and other assorted moving violations (i.e. running red lights, passing an occupied school bus with its “STOP” signs and flashers going)! I confronted Joe and took the car away. At the same time, we discussed the client complaints, and I cited the many no-shows. He gave me a lot of lame excuses which I documented, and which went into a disciplinary memo citing my expectations for the next 30 days. Much to my disappointment, the number and seriousness of the complaints increased during the next 30 days, and I had no choice but to terminate Joe. I later found out that Joe had also had his insurance agent’s license revoked due to numerous improprieties- one for repeatedly pocketing new clients’ life insurance deposits. Long story short: I was duped by my bias and I only had myself to blame. I had failed applicant screening 101. This guy was a sociopath and an empty suit, and I should have done better.  
8. Commit to a goal of lowering your EMR. This will require you to be patient and to implement practical, doable safety practices such as multiple-person lifting and equipment-assisted lifting, Pre-Task Safety Planning for tasks with high inherent risk of injury or illness, daily Foremen/Supervisor-employee Job Hazard/Job Safety Analysis (“What are we doing today? What do we need to do to keep ourselves safe?), Project-Specific/Site-Specific Safety Planning are other tools which contractors use to manage the many constantly-changing project-specific injury and illness risks and exposures. 

Can’t or are unwilling to do these things? Hire from a labor service and engage a safety consultant and give her or him the authority to take timely corrective action. 

I want to thank all the contractors who listened to me despite their hesitations. I was happy to be told “Bob, you did a great job, but you worked yourself out of a job.” Note to the file: many of these same contractors reengaged my services after they unfortunately relaxed their commitment to safety. 

About the Author

Bob Tuman is president of CCR Safety Consulting in California, providing safety consultation to construction contractors and performing Workers’ Compensation and General Liability Loss Control Surveys for property and casualty insurers. For further information or to contact CCR directly, please contact: 805-545-5976 or email bobtuman@gmail.com