Do You Really Know What’s Driving Your Workmen’s Compensation Costs Up?

You pride yourself as an effective business leader and one of your core philosophies is to manage a function you have to be able to measure it. You’ve obviously done a pretty good job at it or you wouldn’t be sitting in the chair that you’re in today. When it comes to your industry and your organization’s operations you know it inside out.

But what about your workmen’s compensation program? Yours is a labor intensive company and work comp represents a good chunk of your total operating costs. Just what are you doing to measure it? How are you managing it?

If you’re like most C-Level professionals in your industry you rely on the risk management department to keep track of your work comp and you require monthly reporting from them. This probably takes the form of a one page "analysis" that tracks trends in incurred workmen’s compensation cost per full time equivalent employee (FTE) and cost per $100 of payroll. More than likely the report is broken down by company departments so you can hold those managers accountable if there is an upward trend in their area of responsibility.

This report is fine for tracking trends but does it really tell you what’s driving the cost?

The answer is no. What your VP of Risk Management knows, or should know is that the work comp industry as a whole is broken and has been for decades. This industry, unlike yours, has no basis in productivity. In fact the less productive it is, the longer it takes to manage a claim, the more money it earns.

Holding a department manager accountable for his or her workmen’s compensation costs is akin to contracting for overpriced gasoline and then telling the fleet manager to make the vehicles more fuel efficient. Yes, the company does play an important role in preventing accidents from occurring in the first place, but after an accident the system takes over and the claim is processed (not managed) without any sense of urgency or efficiency.

You are paying them and you are playing by their rules.

A serious analysis of your work comp vendors will reveal a system of referral commissions between vendors and your TPA or between vendors and vendors. These referral fees can be as much as 10% of your total work comp cost. Do the math. What does 10% of your organization’s workmen’s compensation expense equal?

As bad as these referral commissions are, an even bigger concern is the lack of urgency to get a worker back on the job because lost time claims are the single biggest contributor to your overall costs. If you have an aggressive Return To Work policy and you have alternative and light duty jobs identified, then rarely is there a need for an injured worker to remain off work for any extended amount of time.

So what can you do? Keeping that 10% savings in mind can you think of any reason why you shouldn’t bring in professionals to do an in depth analysis? If you could bring in a risk management consulting firm, one that you could trust, and have them root out the hidden costs and identify failures in claims management not only would you save on the costs but you could change the rules of the game.

CX07, a risk management consulting firm based in Chicago has performed countless work comp audits for their Fortune 500 clients and have been responsible for not only millions in savings but establishing performance benchmarks for each vendor type in the industry. The savings are great but knowing that going forward you have the most efficient self insured plan available is even more reassuring and actually gives you a competitive edge.

If you would like more examples of common hidden costs in the workmen’s compensation industry, spend a moment viewing CX07’s >7 Secrets< video series. Or if you are ready to move now visit >link< to request your free workmen’s compensation analysis.

If you’d like to learn more ways you can save (minimum of 10%) take a look at CX07’s 7 Worker's Compensation Secrets video series right now.

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