How Workplace Safety Programs Can Lower Workers’ Comp Costs

Topics: Workers' Compensation

The cost of workers’ compensation claims is quite high, even if the number of accidents has declined. The Occupational Safety and Health Administration (OSHA) found that “workplace injuries and illnesses have a major impact on an employer's bottom line. It’s estimated that employers pay almost $1 billion per week for direct workers' compensation costs alone.”

Companies are creating workplace safety programs as a way to invest in their company’s safety while at the same time improving employee welfare and productivity. Companies that devote resources to these safety programs believe losses from accidents are risks that can be prevented, so taking the steps to prevent them is seen as an investment for the health of the company.
 

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Business Impact of Workers’ Compensation Claims


Workers’ compensation insurance protects a business and its employees should an injury on the job occur. These benefits can address medical care and related medical costs, retraining, lost wages until the employee can return to work or compensation for permanent disability.

The frequency and severity of workplace injuries are strongly correlated to a small business’s workers’ compensation insurance costs. In fact, Insurance Business shared that the relationship goes further, adding the “severity of workers’ compensation claims that an organization experiences, their premiums and their commitment to safety is a very direct one.”

In the insurance industry, the association between loss history and workers’ comp premiums are connected by an experience modifier. Businesses who have safe workplaces could see an experience modifier that is better than average and therefore pay less for their workers’ comp premiums.

Brad Wilkins, senior loss control specialist at AmTrust Financial, explains the impact of workplace safety programs on small businesses: “Workplace injuries can have a much greater negative effect on a smaller company than on a larger one, and a single lapse in safety can lead to higher premiums. It’s a great incentive for small employers to put energy into safety programs.”


Tips to Lower Workers’ Comp Rates


OSHA has recommended practices for safety and health programs for businesses of all sizes, which then can be customized to an organization’s specific needs. Companies can follow these recommendations to reduce their workers’ compensation insurance costs:

• Assess workplace hazards: Create a process to identify potential hazards in your office, shop or work site. Have your insurer, local chapter of the National Safety Council, OSHA, etc., visit your location to point out the hazards. Employees should also be encouraged to recognize and report any dangers or near-miss accidents.

• Create a safety program: Implement a written safety program that has the full support of management and top leaders down to the employees.

• Communicate with staff: Explain the workplace safety program clearly to employees and involve them in the implementation and day-to-day processes. Hold everyone in the workplace accountable for his or her actions.

• Investigate every workplace incident: Every type of workplace incident needs to be investigated no matter the size or injury type. The investigations will give insights to which safety processes are not working or need to be updated to prevent future accidents.


Importance of Workplace Safety Programs


Investment in workplace safety programs not only helps reduce on-the-job injuries and illnesses, but it can also bring savings in workers’ comp and other medical costs. Organizations often benefit from larger financial savings over the long run. OSHA shows that employers who establish employee safety programs are able to reduce costs related to injury and workplace illness by up to 40%.

Employers that enforce safety procedures and regulations, provide safety training, education and occupational health programs create a workplace environment in which employees feel safe coming to work as well as create an environment of employee loyalty. The financial return on investment (ROI) of these types of safety programs are revealed in increased productivity, improved customer service, savings from fewer injuries and lower workers’ compensation costs – though these savings may take time to realize.

Effective workplace safety programs impact a company in every aspect from production to morale. Wilkins further emphasizes this point saying, “Once a culture of safety takes hold, quality usually starts improving all over. People start paying more attention, they’re watching out for each other, and when people care about each other, the workplace starts getting cleaner, and equipment and tools are treated with respect and are better maintained. Attitudes and morale improve and there are fewer sick days. When all of these gears start shifting and the pieces start moving in the same direction, a company that can keep its focus on safety can really move from being good to great.”


AmTrust’s Risk Management Solutions


Download a free copy of our ROI of Safety white paper to find out more information about controlling the cost of workers’ compensation claims by implementing a dedicated workplace safety program.

AmTrust knows that safety training is key to a proactive approach to minimalizing injuries, incidents and controlling overall costs. Our Loss Control Department can help insureds by providing the most effective safety resources and commercial property safeguards to ensure their ongoing success.


This material is for informational purposes only and is not legal or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by location. Contact your local RSM for more information.
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