Opinion: How to Save on Workers’ Compensation

By Carl Zeutzius

Director of Sales and Marketing

UNICO Group

This Opinion piece appears in the July 5 print edition of Transport Topics. Click here to subscribe today.

With the trucking industry slowly emerging from hard times at last, it ought to be unalloyed good news that motor carriers are reporting fewer workers’ compensation claims than before. Unfortunately, it is also true that both the average cost per claim and injury rate are higher for trucking than other industries.

In fact, the U.S. Bureau of Labor Statistics reported in 2007 that the injury rate for trucking was an alarming 30% higher than for other U.S. industries. Factor in trucking’s higher average medical and indemnity costs, and you have a decidedly bleak picture.

It doesn’t have to be that way.

Although many trucking company officials believe that money spent on workers’ compensation is simply an unavoidable cost of doing business, it isn’t. There are numerous things carriers can do to keep workers’ compensation costs down, beginning with the half-dozen that follow:

1. Watch out for employee misclassification. Workers’ compensation insurance rating boards frequently misclassify employees, with expensive results. For example, a regional trucking company may wind up with its drivers classified as longhaul, increasing costs considerably. In one memorable case, a carrier was overcharged $15,000 because a broker failed to make sure the correct workers’ compensation class codes had been assigned.

2. Understand the notoriously confusing “experience modification” factor. The “experience mod” is an adjustment made to workers’ compensation premiums based on the company’s payroll and its incurred losses for the prior three years. It compares a carrier’s losses with those of similar-size trucking companies in their particular segment of the industry.

Most employers understand that their assigned experience mod will go up if they have a lot of injuries and go down if they manage to reduce the number of on-the-job injuries. But they also need to understand that the firm’s experience mod influences what is paid.

Upper management specifically needs to know:

• The workplace injuries that are associated with which employees.

• The number of modification points that are attributed to each injury.

• The part of the annual increase in premiums that is caused by specific injuries.

• The cumulative increased premium cost over a three-year period — the time a specific claim affects the experience mod.

• How much lower the company’s experience mod could be — and how to attain it.

3. Understand how open claims affect trucking companies. Even though nothing is actually settled, every open claim counts against the experience mod factor just as if it was paid out. Closed claims must be reported to the governing agent immediately, or the experience mod probably will be higher than needed.

4. Embrace a healthy lifestyle — quickly. The 2006 U.S. Department of Transportation Large Truck Crash Causation Study found that 88% of the “critical reasons” for accidents could be attributed specifically to driver actions rather than vehicle failure, weather or other conditions the driver cannot control. Of that 88%, 15% fell into the category of “nonperformance” issues, i.e., drivers falling asleep at the wheel, having a heart attack or being disabled by some other physical problem.

Making sure drivers get proper medical treatment and helping them to stay in shape can have a positive effect on workers’ compensation costs. For example, it’s not surprising that many studies have linked obesity to a higher frequency of workers’ compensation claims when you know that overweight is a factor in obstructive sleep apnea, high cholesterol, high blood pressure and diabetes.

5. Implement pre-employment testing. According to regulations from the Federal Motor Carrier Safety Administration, a driver cannot operate a commercial motor vehicle unless medically certified as physically qualified to do so, so pre-employment testing is important.

It’s also important to know the way your state handles the question of an on-the-job injury’s effect, if any, on a pre-existing condition.

In most states, if a physician says it’s within a “reasonable medical probability” that an on-the-job injury has aggravated a pre-existing condition, that condition becomes part of the workers’ compensation claim, which makes it far more costly. Some states, however, have adopted a different approach, incorporating a “major contributing factor” provision under which the aggravation of a pre-existing condition is payable only if the condition is at least 51% related to an on-the-job injury.

Another tricky area of pre-employment screening is determining if a job applicant has a history of filing workers’ compensation claims. Under the Americans with Disabilities Act, employers neither can ask about past claims nor refuse to employ someone who has filed past claims or has a disability or impairment with no bearing on the job in question.

6. Make sure your insurance agent knows and understands how workers’ compensation specifically operates for trucking.

Plenty of brokers and insurance agents who advertise themselves as trucking experts still overlook methods a carrier can use to keep workers’ compensation costs in line. Look for an insurance professional who has been specially trained to help motor carriers with the intricacies of workers’ compensation, including interaction with the Occupational Safety and Health Administration.

These six points are just a beginning, but they are enough to make it clear that a drastic shift is needed in the “accidents happen, that’s why we have insurance” mentality of too many trucking companies. And that shift should begin with the realization that it’s the trucking company’s money being spent — not the insurance company’s.

UNICO Group, Lincoln, Neb., is an independent insurance, risk-management and financial services group. The author is a certified workers’ compensation adviser.