Insurance FAQs

The insurance industry is typified by insurers with a number of different organizational forms. Stock insurers are corporations owned by the shareholders of the firm. The shareholders hire managers to run the company and the insurance product is sold to customers who may or may not be shareholders in the firm. Mutual insurers are companies which are owned by their customers. Any policy owner of the company also owns a portion of the company. Reciprocal insurers or reciprocal exchanges are insurance companies where the policy owners of the exchange agree to insure one another. They are very similar to mutual companies.

Lloyd’s associations are insurance companies where the manager who makes the decisions for the firm also has his/her own personal wealth at stake in the firm. Blue Cross/Blue Shield insurers are typically nonprofit (some may now be for profit), community oriented health insurance providers. Blue Cross/Blue Shield companies typically offer traditional indemnity health insurance. HMO’s or Health Maintenance Organizations are companies which provide comprehensive health care coverage to their customers. HMOs, in their simplest form, provide prepaid health care coverage. Once you pay your premium you can use the services of the HMO at little or no further cost to you.

From the customer’s point of view, the company which offers you the product and service you want, at the quality you desire, for the lowest cost should be the company you purchase insurance from regardless of their organizational form. Economists have tried in numerous studies to identify which one of its organizational forms can provide the insurance product at the lowest cost and the answers are mixed. Therefore, potential customers should probably base their purchasing decisions on other factors such as the financial quality of the firm.

Insurers deliver their insurance products to policy owners primarily through independent agents or through exclusive agents. Historically, almost all insurance agents were independent business people paid on commission. More recently, many insurance companies have adopted a system where the agent is a paid employee of the firm rather than an independent business person. These agents are referred to as exclusive agents.

Independent agents have the freedom to shop your insurance for you with multiple insurance companies. The reason some companies have paid employee agents is obvious. The exclusive agent companies do not want their agents to be able to compare their policies with other insurance companies. Also since independent agents are not employees of the company, they have the freedom to offer more objective claims advice and more personal claims service. Many exclusive agent companies require their policyholders to call an 800 number rather than call their agent. Once this number is called, the potential claim goes on a claim record whether or not it is covered by the policy. The personal, customized service provided by independent agents has stood the test of time as the number of independent agencies has grown dramatically in the 21st century.

Many property-casualty and life insurance products can be purchased without the use of an agent. Typically potential policyholders will either be contacted through mail or Internet ads, or they can call a 1-800 number to apply for the insurance product. These companies claim to have better pricing, but many times they do not. They claim to save you money by “cutting out the middleman”, but what they do not tell the consumer is they are spending hundreds of millions of dollars on TV, radio, mail, and newspaper ads on their distribution system, as well as employee expenses. Instead of receiving personal, customized, quality local service from a highly trained insurance professional, the consumer is many times buying an inferior product that is based on price only and impersonal service from distant and minimally trained employees. By purchasing one’s insurance from an independent agent, a consumer can talk to the same people every time.

Insurance is a product where the insurance company promises to make future loss payments in return for a premium you pay today. It is therefore important that you know the financial health of the insurer when you are deciding how much you are willing to pay for the product. For example, holding all other things equal, people should pay slightly more for a life insurance policy from an insurance company with a higher financial rating, or should pay slightly less for the same policy from a company which is not as financially strong.
In order to make this kind of informed purchasing decision, a number of private organizations, called rating agencies, rate the financial stability of insurance companies. Major insurance rating agencies include the A.M. Best Company, Standard & Poor’s, Weiss Research, Duff and Phelps, and Moody’s. Each of these companies uses data obtained from various sources to rate the financial strength of insurance companies. It should be noted, however, that each organization has its own rating standards and therefore the financial grades from two different rating agencies may be different. The best advice usually given to insured is to check the financial rating of the insurer from as many rating agencies as possible to determine the range of opinions of the financial health of the company.

The monthly publication Best’s Review (Life and Health Edition) periodically contains information on assets, premium income and products sold by most of the largest life insurance companies operating in the U.S. The sister publication, Best’s Review (Property and Casualty Edition) provides certain statistical information on large property-casualty companies. Both magazines are published by the A. M. Best Company in Oldewick, N.J. Public libraries in cities of medium to large size frequently subscribe to one or both of these magazines.

When you apply for an insurance policy, you will be asked a number of questions. For example, the agent will ask you a number of demographic questions such as your name, age, sex, address, etc. In addition to these demographic questions, you will be asked a number of other questions which will be used to determine what type of risk you are. For example, when an insurance company is deciding whether or not to offer auto insurance to a potential policy owner, it will want to know about the person’s previous driving record, whether there have any recent accidents or tickets, what type of car is to be insured and various other types of information.

All of this information will be used for two purposes. First, based upon the responses to these questions, the insurance company will decide whether the profile of the applicant is consistent with the type of risks the insurer is trying to attract. Some insurers specialize in offering insurance to only very safe drivers and therefore will only accept applications from people who fit the profile of a safe driver. Second, once the insurer has decided that your risk profile is consistent with the types of risks it accepts, the answers to the questions will be used to determine which rate to charge you. For example, the insurance company will decide whether you should be offered insurance at the high risk driver rate or the low risk driver rate.

Collectively, this entire process is known as the underwriting process. The primary function of the underwriting department in an insurance company is to decide whether or not to offer insurance to a person who has completed an application. If the answer is yes, then the underwriting department seeks to determine the “quality” of that risk so that the proper premium can be charged. That is, high risk people should pay more than low risk people.

Be sure to talk to your insurance agent about available discounts on car or auto insurance such as: multi-car, renewal, claim-free, student discounts, driver training, defense driver course, anti-lock brakes, air bags, anti-theft devices, and auto/home discounts. Ask how much you can save by increasing your deductibles.

Insurers frequently award lower rates to homeowners who guard against theft, accidents and other losses. And companies may provide discounts to premium for multiple-customers (home and auto). Here are some things you can do that generally qualify for lower premiums:

• Secure your home with dead bolts and window locks.
• Install a security system with outside signal and connection to local police.
• Install and maintain smoke detectors.
• Install a sprinkler system for fire.
• Install a fire alarm that automatically alerts the local fire department.
• Purchase your auto and home insurance from the same company.

Safety Equipment Discounts are available for safety equipment. If your boat is equipped with any of the following, check with your agent or broker to see if you qualify: GPS, Ship to Shore, VHF, Depth Sounder, Halon system, Fume detector, Alarm System Loran, and Boating Safety Courses. If you have taken the Coast Guard certification course, check with your current company as to the availability of a discount.

The term “full coverage” is a term that means the legally required or most commonly requested coverages. The term “full coverage” does not mean that everything is covered no matter what happens. “Full coverage” typically includes Bodily Injury, Property Damage, Uninsured and Underinsured Motorist, Damage to a covered vehicle (also known as Comprehensive and Collision), and any other coverages available such as: rental car, towing, road service, or additional equipment coverage. Your auto insurance policy declaration page lists the coverages you have selected

The coverage provided varies from state to state and you should consult with your insurance agent for details. Generally, you are covered only for liability to the third parties unless the owner is a resident of your household, or the vehicle is furnished for your regular use. In many states, you are not covered for physical damage to the borrowed vehicle. Any coverage provided is over and above the collectible coverage provided by the owner of the vehicle

It is recommend that you keep a booklet detailing the items or a videotape of your personal property. Having a complete inventory record at the time of loss could save you thousands of dollars because no one remembers everything, and unless written down, lost items will go unclaimed. The booklet should be kept in a safe place, preferably not at home. Keep it in a safe deposit box or with your insurance agent. It is also a good idea to retain all bills for major purchases and additions to the structure of your home. These could serve as proof of purchase in the event of a claim and should also be kept in a safe place. Finally, take pictures of or videotape all these items. Lay china and silverware on a table so that the picture will show the number of pieces and other details such as the design. Keep the pictures and all receipts in a safe place.

If you have auto insurance protection on your personal vehicles, you do not need to buy extra insurance.

Rental car coverage is only for vehicles that have been in an accident, not for cars experiencing mechanical failure.

Yes. All licensed drivers living in the household need to be listed on the auto policy unless they have their own auto insurance elsewhere.

An auto insurance liability policy usually covers the following people:

• Named insured — the person or persons named in the policy, no matter what car they are driving.
• Spouse — even if the spouse of the named insured is not named on a policy, liability insurance almost always covers him or her, unless the couple does not live together.
• Other relative — anyone living in the household with the named insured related to the insured by blood, marriage or adoption, usually including a legal ward or foster child.
• Anyone driving the insured vehicle with permission — someone who steals the car is not covered. 

Before you choose and meet with an independent agent or broker to discuss insurance, compile the following information:

• Current business insurance policies
• Updated payroll and sales records
• Current profit and loss statement
• Loss information from the current and three prior years
• Your OSHA log, if available
• Current schedule of vehicles and Motor Vehicle Reports (MVR)
• Safety programs/procedures and safety meeting records
• Your company’s promotional literature

Once your papers are in order, assess how much risk you should retain – the deductible. The risk the insurance company assumes is the limit of liability over and above the deductible. Insurance allows you to transfer the risk of financial uncertainty to an insurance company for a known premium. So, first calculate how much of that financial uncertainty you’re willing to take on and how much risk you want the insurance company to assume.

Generally, the premium you pay depends on the deductible, or risk, you’re willing to assume if a loss occurs. By choosing a higher deductible, you retain more risk, but pay a lower premium. On the other hand, if you choose a lower deductible, your premium will be higher. When premiums are high or coverage is difficult to obtain, you may want to choose a higher deductible and directly pay for smaller losses. The premium savings you’ll realize may allow you to purchase other essential coverages. This strategy makes the most of your insurance dollar, providing you with the maximum protection against losses that can result in bankruptcy, debt financing or the postponement of future business plans.

If you take this approach, make sure you build the average annual costs of smaller losses into your budget. Once you’ve determined how much risk you will retain and how much risk you want the insurance company to assume, you’re ready to choose an insurance agent.

The following list includes only a few helpful steps. Consult with insurance agent and a loss control representative to learn more about containing insurance costs.

General Considerations

• Increase your deductibles.
• Establish a safety program.
• Implement and maintain professional loss control recommendations.
• Notify your insurer as soon as you learn of a loss.

Property Protection

• Keep your workplace clean and orderly.
• Carefully store all combustible products and equipment.
• Make sure all fire extinguishers are accessible and in good condition.
• Establish emergency procedures and conduct employee drills.
• Install a sprinkler system at your workplace and inspect it regularly

Auto Protection

• Review the Motor Vehicle Reports (MVRs) of your drivers annually.
• Establish fleet safety and fleet maintenance programs.

Employee Workers’ Compensation

• Maintain accurate records of payroll divisions.
• Maintain an accurate OSHA log.
• Carefully review and track the progress of all workers’ compensation claims.

Implement an occupational injury management program to help bring injured employees back to work quickly.

Let’s face it. Launching and running a business takes capital, motivation and yes, even physical stamina to handle the stress and demands of a new or growing venture. And it’s risky. In fact, one out of every five businesses fails within the first five years of opening.

Handling inventory, scheduling time, purchasing supplies, handling payroll — there are a myriad of procedures every home or small business entrepreneur needs to know, but one of the most critical and often neglected is buying proper insurance coverage.

Taking Your Business Inventory

What would happen if a fire or other disaster destroyed your property, making it impossible for you to get back to business right away? Would you remember what property had been destroyed? One way is by taking a complete inventory of all your personal business property, determining its value, and deciding what’s worth insuring. Having an up-to-date business inventory will help you get your insurance claim settled faster, verify losses for your business’ income tax return and help you purchase the correct amount of insurance.

Start by making a list of personal business property, describing each item and noting where you bought it and its make and model. Clip to your list any sales receipts, purchase contracts, and appraisals you have.

What’s the Right Coverage for You?

Then there’s the question of what types of coverages you’ll need. Aside from personal business property, there is liability insurance, business income, insurance for the building, boiler and machinery, human failure, employee protection and management protection, among others. The type of coverage you need depends on a number of factors including what kind of business you operate.

How to Keep Costs Down

Start your search for a policy with trade associations or business groups. In many cases, these organizations are able to provide reduced insurance rates based on the volume of business they can offer the insurance company. They’ve also negotiated coverage specific to your type of business, which can save you significant time in determining what you should cover. Also make sure that you are working with an agent that understands your type of business.

Source: Insurance Information Institute

Business interruption insurance can be as vital to your survival as a business as fire insurance. Most people would never consider opening a business without buying insurance to cover damage due to fire and windstorms. But too many small business owners fail to think about how they would manage if a fire or other disaster damaged their business premises so that they were temporarily unusable. Business interruption coverage is not sold separately. It is added to a property insurance policy or included in a package policy.

A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential.

1. Business interruption insurance compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the profits you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt.
2. Make sure the policy limits are sufficient to cover your company for more than a few days. After a major disaster, it can take more time than many people anticipate to get the business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in.
3. The price of the policy is related to the risk of a fire or other disaster damaging your premises. All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fire. Also, a real estate agency can more easily operate out of another location.

Source: Insurance Information Institute

Your staff could be 5 or 500, in today’s environment, every business is at risk. Employment practice liability concerns will touch virtually every single business in the U.S. The increase in employment-related lawsuits appearing in the media is just the tip of the iceberg – there are thousands more that you’ll never hear about. What do these suits cost? The average suit will cost the average company hundreds of thousands of dollars, internal employee unrest and public relations damage that can take years to undo.

The fact is that the tide of employee-related laws keeps rising and employees are more savvy than ever about pursuing legal action. We can help protect your exposures with EPL coverage that is uniquely adapted to a volatile marketplace.

Q: Who Needs Employment Practices Liability Coverage?

Corporate entities or organizations with at least one employee.

Q: What Can EPL Insurance Cover?

• Failure to promote
• Unwarranted discipline
• Invasion of privacy
• Wrongful dismissal faulty evaluation
• Emotional distress
• Misrepresentation
• Defamation
• Harassment
• Discrimination
• Ill-directed discipline
• Breach of employment contract

Q: What Federal Laws Affect Employment Liability?

• Civil Rights Act of 1964 – Title VII Prohibits discrimination by employers based on color, race, religion, sex or national origin. The law applies to all employers with 15 or more employees.
• The Family and Medical Leave Act – Requires that all employers with 50 or more employees provide up to 12 weeks of paid leave per year for an employee due to: birth of a child, placement of a child with an employee for foster care or adoption, or the need to care for oneself, a child, spouse or parent with a serious health condition.
• The Age Discrimination in Employment Act (ADEA) – The ADEA prohibits employment discrimination against persons aged 40 and older based solely on their age. ADEA applies to employers with 20 or more employees.
• Civil Rights Act of 1991 – This act amends Title VII of the Civil Rights Act of 1964 to include additional recoveries for a claimant and also allows a claimant the right to demand a jury trial.
• Americans with Disabilities Act (ADA) – The ADA prohibits discrimination on the basis of disabilities and also requires an employer to make reasonable accommodations in the workplace for disabled employees. This law currently applies to employers with 15 or more employees.

While the coverage included in any workers’ compensation policy is largely mandated by state statute, we distinguish the policy by going beyond those requirements to expand coverage in several key areas. Better yet, we complement those expanded coverages with exceptional claims handling and a variety of cost containment services.

In general, the current workers’ compensation system represents a compromise between employers and employees regarding employment-related injuries or illnesses. Basically, employees relinquish their right to sue employers if they suffer some job-related injury or illness. In return, employers agree to provide state-mandated benefits if such injuries or illnesses occur.

To ensure employers will have the money to pay these mandated benefits, most states require that employers demonstrate that they have the financial ability to pay any claims that may arise. Typically, this financial ability is demonstrated through the purchase of workers’ compensation insurance.
Most workers’ compensation insurance policies actually provide two types of coverage:

• Workers’ compensation Coverage. Pure workers’ compensation coverage provides benefits for injured workers as required by state law — regardless of who is at fault for the injury or illness. In other words, whatever benefits your state requires that employers provide for injured workers, your workers’ compensation policy provides.
• Employer’s Liability Coverage. This additional coverage provides employers with liability protection in case they are ever sued for damages arising from employment-related accidents or diseases. However, to collect benefits provided by Employer’s Liability Coverage, both the employee as well as anyone else not covered by workers’ compensation laws (i.e., spouses and dependents), would have to prove that the employer was actually legally responsible for the employee’s injury or disease.

In general, workers’ compensation insurance is designed to provide benefits for your employees. However, the individuals that are defined as employees are determined by state law. And in workers’ compensation cases, courts have typically been very liberal in their definition of employees, so as to provide injured workers with broad protection under the state’s workers’ compensation laws.

The Employer’s Liability insurance included in your workers’ compensation policy can also provide damages to injured workers separate from their workers’ compensation benefits. Family members and other third party claimants may also receive benefits under this coverage — if they prove the employer’s legal liability. 

Typically, your workers’ compensation policy will pay for:

• Medical benefits for a covered injury or disease — including medical, hospital, surgical and other related health care costs as well as physical therapy and prosthetic devices
• Disability income benefits – including compensation for lost wages
• Rehabilitation benefits – including services to help an injured worker return to productive work, such as vocational rehabilitation
• Death benefits – including a flat amount for burial expenses as well as partial replacement of the worker’s weekly wage.

Work-Related Injuries

If one of your employees is accidentally injured while on the job, your workers’ compensation policy will pay for a wide range of services to aid the injured worker’s recovery and return to productive work. These services can include the cost of medical care, compensation for lost wages, and rehabilitation therapy.

If your employee is accidentally killed while on the job, your policy will also provide death benefits — including burial expenses and partial replacement of the worker’s weekly wage.

Occupational Illnesses

If some condition in your working environment actually causes one of your employees to become ill or contract a work-related disease, your workers’ compensation policy will provide a wide range of benefits to help treat this illness and speed the employee’s recovery. These benefits will typically cover the cost of medical care, compensation for lost wages, and other required therapy.

If your employee dies from this disease, your policy will also provide death benefits — including burial expenses and partial replacement of the worker’s weekly wage.

Coverage for Employees Not Subject to Workers’ Compensation Laws

Most workers’ compensation policies only provide benefits for those employees your state specifically identifies as subject to workers’ compensation laws. But some policies go beyond this requirement. It automatically extends bodily injury coverage to employees who aren’t expressly covered by your state’s workers’ compensation laws — such as volunteers. (Not available in Wisconsin and New Jersey.)

Liability Suits Related to an Employee Injury

To recover benefits under your state’s workers compensation law, your employees don’t have to prove you were somehow responsible for their employment-related accident or disease. But if they can prove you were liable for their accident or illness, they may be able to successfully sue to recover damages beyond the workers’ compensation benefits.

If so, you’ll be comforted to know that the Employer’s Liability portion of your workers’ compensation policy can pay for the damages awarded to your injured employee, as well as, the legal expenses involved in such a suit. This coverage may also provide certain benefits if you are ever sued by a third party affected by a workplace injury, such as a family member of the injured worker.

Expenses You Incur as Part of a Workers’ Compensation Claim

If you are ever involved in a workers’ compensation claim, proceeding, or suit, most workers’ compensation policies will pay for any reasonable expenses you incur at our request to participate in these proceedings or help prepare your defense. In fact, we’ll even pay for any earnings you lose because of these activities — a benefit most standard workers’ compensation policies do not offer.

Legal Expenses in Workers’ Compensation Cases

If you are protected by workers’ compensation policy, you generally won’t have to worry about bearing any legal expenses related to a workers’ compensation or employer’s liability claim. In fact, we will assume the responsibility of investigating, defending and settling any related claims, proceedings or suits. We will also supply the services of an attorney to represent you in any such suit. In short, we will:

• Pay the cost of defending you in any hearings, suits, etc, that result from any occurrences covered by workers’ compensation; and
• Pay damages if you are successfully sued because of a job-related injury or disease.

Compensation for Family Members

If an injured worker’s family members can prove that you were legally liable for a work-related injury or illness, they may be able to collect damages from you. In such cases, the employer’s liability coverage provided by your policy may pay for:

• compensation for family members for their “loss of consortium” or access to the injured worker;
• damages for injuries to spouses or relatives that result from the injury to the spouse or relative.

Coverages for Employees While Traveling on Business

Most workers’ compensation policies only provide coverage for the states in which you do business, as specified in your actual policy. Therefore, check your policy if it extends its workers’ compensation coverage to employees traveling outside the standard policy territory (excluding U.S., Canada, Cuba, Iran, Iraq, Cambodia, North Korea, Libya, and Lebanon).

Accidents Over Navigable Waterways

If any of your employees ever have an accident while carrying out their job responsibilities over a navigable waterway, they may be subject to the workers’ compensation benefits provided by the United States Longshore and Harbor workers’ compensation Act. Typically, benefits mandated by this act are more extensive than those provided under a state’s workers’ compensation law.

Employer’s Liability in Monopolistic States (NV, OH, WA, WV, WY)

In six states, the state governments mandate that employers purchase workers’ compensation insurance from the state fund. Referred to as “monopolistic states”, these states don’t even allow insurance companies to sell workers’ compensation to employers headquartered within their borders.

Even if your business isn’t domiciled in one of these states, you could still be affected by their laws. If one of your employees is injured in any of these states and decides to file a workers’ compensation claim, that state’s laws would apply. In such a situation, you’ll be reassured to know that most workers’ compensation policies automatically provide “employer’s liability” coverage. This coverage would pay for related expenses and damages in case you are ever sued for the employment-related injury or illness. Other insurers may offer this extended coverage in these states — but only if you specifically request that they add it to your policy.

Third Party Suits Against the Employer

If your employees are injured in an accident, they may try to sue a “third party” (a company other than yours) — if they believe that party is somehow responsible for their injury. In turn, that third party may sue you — if it believes your company is legally liable for the accident.

For example, an employee injured while using a piece of equipment may sue the equipment manufacturer for some alleged negligence or faulty design. However, the manufacturer can then turn around and sue your company — if they believe the accident was instead caused by your improper maintenance of the equipment.
In this situation, the employer’s liability coverage of your policy would pay any damages awarded by the court to compensate for the bodily injury.

Failure to Notify Insurer of Potential Hazards

When you apply for a workers’ compensation policy, you have an obligation to disclose to the insurer all known hazards. But what if you don’t even know you have a potential hazard at your business site? Unlike other policies, our workers’ compensation policy explicitly states that we won’t deny coverage if something happens as a result of that undisclosed hazard — as long as you did not intentionally fail to notify us of its existence.

Investigation into Workers’ Compensation Fraud

Unfortunately, fraudulent claims add to every employer’s workers’ compensation costs. And since most insurance companies are serious about helping you control costs, we’re serious about fighting fraud. Our claim professionals can also coach you on how to spot and handle a potentially fraudulent claim. 

Whether you employ only one part-time worker or thousands of employees in multiple locations, workers’ compensation insurance can be a significant cost of doing business. Comprehensive education and ongoing training in the workplace will help you reduce worker’s compensation costs.
Workers’ compensation insurance premiums are calculated based upon a combination of factors including size of a company’s payroll and claims history compared with other businesses in your industry. This means companies can do a great deal to impact their premium costs, reduce worker claims by creating a work environment oriented toward worker safety and training.

There is a great deal of information available to employers about how to improve on the job safety and training, primarily through your worker’s composition carrier. Many insurance companies provide trained industrial hygiene specialists who will consult with you for little or no cost to evaluate your current safety and training programs.
Improving Your Current Worker Safety Programs

Loss prevention begins with an audit of your company’s current safety programs. Study how employees are performing their jobs, how job processes can be improved to reduce and eliminate injuries. Review your industrial accident record. Is there any correlation between frequency of accidents and job process? You may want to consider the following steps to improve your company’s programs.

1. Documentation

Worker safety programs should begin with documented written programs including job descriptions, proper use of equipment and safety procedures in the event of an industrial accident.

2. Training

All new employees should be thoroughly trained on their job duties and safe handling requirements. Existing employees should receive regular and updated training on proper use of equipment and job procedures.

3. Regular Updates and Supplemental Materials

Many workers’ compensation carriers as well as industry associations and state regulators offer published information, videos and newsletters which can be distributed to employees to increase job safety awareness, enhance training and reduce on the job injuries.

4. Worker Safety Committees

Develop a committee or group comprised of internal staff from a variety of functional areas to evaluate and suggest improvements in your company’s accident prevention programs. The charter of this organization should focus on process, education, and ongoing training.

5. Early Return to Work Programs

Encouraging early return to work by previously injured employees can help reduce the costs of workers’ compensation claims in a number of ways. Historically, workers’ compensation claims can be reduced if employees can be retrained for a new position because they possess valuable experience or historical information about the company. They can learn their new role more quickly make an immediate contribution. Job retraining is a proactive approach that improves employee morale significantly. Safety and education can result in substantial reductions in industrial accidents and worker’s compensation claims. The first step is creating greater awareness about job hazards and safety processes among your personnel.

We believe these measures are so important that we will help our policyholders implement and maintain these programs, all at no additional charge.

Develop a Written Safety Program

If accidents don’t happen, they can’t affect your premium. Our loss prevention specialists can help you develop and implement a practical, effective safety program tailored to your special needs.

Implement a Drug Testing Policy

An integral part of any safety program is a drug testing policy, because drug-impaired employees cost companies an additional 25 percent of their salaries each year.

Determine Second Injury Fund Eligibility

The SIF is a state-administered program that may partially cover claims costs when an employee with a permanent, preexisting condition is injured on the job. To qualify, employers must have documented knowledge of the condition before the injury occurs. Post-employment questionnaires and health screenings that comply with the Americans with Disabilities Act (ADA) are the best way to obtain this information.

Develop a Return-to-Work Program

The faster you get employees back to work, the lower your claims costs will be. Before an accident occurs, establish a return-to-work program that includes written job descriptions, modified work assignments and set transitional duty periods.

Report Claims Within One Hour

Statistics show that late reporting can increase claims costs up to 50 percent. That’s why you should report claims and injuries within one hour.

Report Suspected Fraud

Report fraud if you suspect a claim is fraudulent or if any of the following early warning signs are present: the injured employee is never home, you hear rumors the accident didn’t occur on the job, the employee’s story changes, the employee switches doctors after being released to work, there are no witnesses or the accident is reported late, on a Monday or before a layoff.

Conduct Accident Investigations

Train supervisors to investigate accidents and complete reports. Ask the employee and any witnesses to explain in detail how, where, when and why the injury occurred. Use this information to correct any hazards and also to spot possible third-party liability. 

Workers’ compensation insurance protects employers from claims resulting from injuries to employees. It protects your business from lawsuits and provides employees with compensation for on-the-job injuries.

1. Make sure that all your employees are trained properly for the job they are doing.

2. Make sure that the workplace is as ergonomically safe as possible. Don’t have an employee who is 4’11” working in or on a workspace designed for someone 5’6″. This is one of the main areas where problems can occur.

3. Make sure all employees are wearing proper equipment for the job. This includes not only those employees doing heavy manual labor, but also those individuals who are sitting at a desk and typing all day. Cumulative trauma, especially Carpal Tunnel Syndrome, is the fastest growing area of worker’s compensation injuries. When an injury does happen, don’t just ignore it. Handle the same way you would handle the injury of a loved one or a family member. This automatically sets up a feeling of caring between you and the injured worker.

4. Keep up the communication between you and your injured employee. Remember, whether this employee is on site or not, he or she is costing you money. The more you keep up the levels of communication, the better the chance the employee will want to return to work sooner. This not only saves you money, as in actual cash outlay, it also saves you money in indirect costs (hiring someone to temporarily take over the job, changing around shifts to accommodate workers absences, etc.).

5. In keeping up communication, that also means to contact the doctor who is treating the worker. This can definitely keep down costs as you are more aware of what is going on with the worker and the doctor. Not all doctors are saints. Some are just in it for the money, so it’s in your best interest to keep up the lines of communication. Also, it is important to have more than one “Company Doctor”. You should have not only the Emergency center, urgent care, etc., you should also have other types of doctors. Not everyone responds to the same person for every injury. Have a list of three or four different types of doctors, chiropractors, medical doctors, acupuncturists, etc. This gives the employee a chance to choose what kind and who he may wish to see for his injury.

Once an injury has occurred, the goal of a Return to Work program should be to return the injured employee to work as quickly as possible. To accomplish that, the employee’s job may have to be reevaluated considering the following two alternatives:

1. Modified Work: The employee returns to his original job, but some restrictions are placed on the job by the treating physician. Restrictions may include reducing the amount of work time, and/or restricting certain activities such as bending or lifting. Modified Work is also referred to as Light Duty.

2. Temporary Alternate Work: The employee returns to work, but because the original job cannot be modified to conform with the physician’s restrictions, he or she performs another job that accommodates the injured employee’s abilities.

Benefits of a RTW Program

A RTW program is beneficial to both management and employees. Such a program:

• Allows an injured employee to continue to be productive and to contribute to the company.
• Maintains communications between injured employees and management.
• Reinforces the company’s interest and concern for an injured employee.
• Improves communications between company, the employee and the treating physician.
• Discourages malingering.
• Reduces the disability associated with an injury and its related costs.

Another benefit of developing a RTW program is that it helps a company comply with the Americans with Disabilities Act (ADA). By following the steps listed below, specifically those in Job Descriptions, the essential components of each job will be identified and classified. This will help management identify jobs which potential employees with disabilities may be able to perform.

Top Management Support and Commitment

In order for a RTW program to be successful, it is imperative that management make a firm commitment to “drive home” the need of the program and its benefits to all employees. Once the program has been developed, management should develop a strategy for communicating its enthusiasm for the program throughout the company.

Job Descriptions

A written description should be developed for all present jobs as well as potential alternate jobs. The description should include a listing of the job’s essential functions, the location where it is performed, length of shift, etc. Job functions such as lifting, carrying, bending, walking, standing, and other repetitive motions should be classified according to severity and recurrence.

Policies and Procedures

Top management should develop policies and procedures by which RTW programs will operate. A variety of issues must be addressed, including: Who administers the program, and how is that administrator selected? When can the program be used, and by whom? What sort of forms (job demands, doctor’s release to work, standard letters) should be developed? How long should Temporary Alternate Work last? How long should Modified Work last?

Communication and Training

Once the program is developed, top management must develop a strategy for communicating with employees about the importance of the program and their role in it. This communication may take the form of training for management and supervisors, and group discussions or seminars with employees. Top management may also want to meet with treating physicians or other medical personnel to get their input and involvement.

Follow Up and Evaluation

Top management should establish a timetable for periodic follow-up and evaluation of the program. This will ensure the program’s continued use, identify any incorrect procedures, and reveal concerns that may not have been addressed in the original program.

Following are a series of frequently asked questions (FAQs) and answers about workers compensation insurance.

Q: What is workers’ compensation?
A. Workers’ compensation is an accident insurance program paid by your employer which may provide you with medical, rehabilitation and income benefits if you are injured on the job. These benefits are provided to help you return to work. It also provides benefits to your dependents if you die as the result of a job-related injury.

Q: How long do I have to work to be covered under workers compensation?
A. You are covered from the first day on your job.

Q: How do I know if the company I work for is covered by workers’ compensation?
A. The law requires any business with three or more workers, including regular part-time workers, to have workers’ compensation.

Q: When should I report an accident that happened on the job?
A. You should report any accident to your employer (boss, foreman, or supervisor) immediately. If you wait longer than 30 days, you might lose your benefits.

Q: What do I do about a doctor?
A. Your employer is required to post information identifying medical care providers. Your employer may satisfy this requirement in one of the following ways:

1. Post a Traditional Panel of Physicians consisting of at least four doctors. You may choose any one of the four. The panel must include one orthopedic physician and not more than two industrial clinics. Where possible a minority physician must be included. You may make one change to another doctor on the list without the permission of your employer.

2. Post a Conformed Panel of Physicians consisting of at least ten physicians. This panel shall include the same physicians required in the Traditional Panel plus a chiropractor and a general surgeon. You may make one change to another doctor on this panel without the permission of your employer.

3. Post the name of the Workers’ Compensation Managed Care Organization (WC/MCO) certified by the Board which your employer has contracted with to provide medical services. Your employer must give you a notice of the eligible medical service providers and post a 24 hour toll free number for the managed care organization. A managed care representative will assist you in scheduling an appointment with the eligible medical provider of your choice. You may make one change to another eligible physician at any time, without the permission of your employer.

Q: Who pays for the doctor?
A. Your company’s workers’ compensation insurance carrier will pay for your authorized doctor’s visit if the injury was caused by an accident on the job.

Q: What medical treatment will be paid?
A. All authorized doctor bills, hospital bills, physical therapy, prescriptions, and necessary travel expenses if the injury or illness was caused by an accident on the job. You may also be entitled to medical rehabilitation.

Q: When do I get my benefits?
A. You are entitled to weekly income benefits if you have more than 7 days of incapacity. Your first check should be mailed to you within 21 days after the first day you missed work. If you miss more than 21 consecutive days, you will be paid for the first week.

Q: How much will my weekly benefits be?
A. You will receive two-thirds of your average weekly wage, but not more than $300.00 per week for an accident which occurred on or after July 1, 1996, or $325.00 for an accident which occurred on or after July 1, 1997.

Q: How long will I receive weekly benefits?
A. If your accident occurred on or after July 1, 1992 you are entitled to benefits for up to 400 weeks. If your injury is catastrophic in nature you may be entitled to lifetime benefits. In certain circumstances, your benefits may be reduced after you have been released to return to work with limitations or restrictions, or suspended if you are released to return to work with no limitations or restrictions.

Q: What if I am able to return to work but can only get a lower paying job as the result of my injury?
A. You will receive a reduced benefit based upon your earnings. This benefit will not exceed $192.50 per week if your accident occurred on or after July 1, 1994, or $216.67 if your accident occurred on or after July 1, 1997.

Q: What if my injury keeps me from getting a job?
A. Under the law, if you sustain a catastrophic injury, you are entitled to receive help in getting another job or learning to do another job. If you need help in this area, call the State Board of Workers’ Compensation.

Q: What kind of benefits will I receive if I have a permanent disability?
A. You will receive weekly benefits based on the type and extent of your permanent disability. The authorized treating physician determines any percentage of disability or bodily loss ratings based upon Guides to the Evaluation of Permanent Impairment, Fourth Edition, published by the American Medical Association.

Q: What benefits will I receive if I lose a leg, arm, or other part of my body?
A. You will receive benefits based upon an amount set by law. For example, if you lost an arm or leg you will receive benefits for 225 weeks.

Q: Can I be compensated for loss of sight or hearing?
A. Yes.

Q: Can I receive benefits if I have lost the use of a part of my body?
A. Yes. Benefits are based upon the extent of loss of use of a part of your body as determined by the authorized treating physician.

Q: If I die as the result of an on-the-job accident, what benefits will my dependents receive?
A. Your dependents will receive two-thirds of your average weekly wage, or a maximum of $300.00 per week for death on or after July 1, 1996, and $325.00 per week for death on or after July 1, 1997. Your dependents are your surviving spouse, children or stepchildren. A widowed spouse with no children is limited to a total amount of $100,000.00 unless he or she remarries or cohabitants in a meretricious relationship.

Q: Can I be paid Social Security disability and workers’ compensation at the same time?
A. Yes, but Social Security benefits may be reduced.

Q: What if I don’t receive my workers’ compensation benefits?
A. You must file a claim to protect your rights within one year from the date of your accident. This is accomplished by filing Form WC-14 with the State Board of Workers’ Compensation.

Q: What happens after I file a claim?
A. If you do not receive any benefits, you may request a hearing before the State Board of Workers’ Compensation. A hearing is like a trial in the courts. Your case will be decided by an Administrative Law Judge who listens to both sides of the case and determines what benefits, if any, you should receive. The judge’s decision will be based on the law and the facts involved.

Q: When will the hearing take place?
A. The hearing generally will be scheduled within 45-90 days from the time the judge received the request.

Q: Where will the hearing take place?
A. The hearing will generally be held in or near the county where you were injured.

Q: Do I have to have a lawyer represent me at the hearing?
A. Everyone has the right to represent himself. However, your employer may be represented at the hearing by a lawyer. You may need help from a lawyer in order to present your case properly.

Q: How much will my lawyer charge me?
A. The attorney fee will be based on an agreement between you and your lawyer, subject to the approval of the State Board of Workers’ Compensation.