How’s Your Workers’ Comp Working Out? (Part 1)

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Kelley Carter |

Tips to help determine if insurance coverage is fully protecting you, employees

VIRGINIA BEACH, Va. — Drycleaning business owners now, more than ever, need to be aware of their workers’ compensation coverages and be involved in the process of mitigating potential claim situations for their teams.

“A dollar saved on your insurance coverage when you start a policy is not necessarily a dollar saved in the long run,” says Jamie Albano, president and CEO of Albano Cleaners in Virginia. “Owners need to know their coverage, know their business, and have an agent who can know the details. Otherwise, a ‘savings’ on a policy could cost you a lot of money.”

She has a good point.

As the drycleaning industry evolves and changes, owners and managers face increased regulations, high client expectations, and the potential for decreasing profits.

Ben Latta, owner and CEO of Master Dry Cleaners, also located in Virginia, describes the situation as: “Trying to give clients an Outback-quality product on a McDonald’s budget.”

Today, there is an emergence of more efficient machinery. There are “green solution” cleaning products. There are also increased regulations from OSHA in regards to slips, falls and burns (among the most common workers’ compensation injuries in the drycleaning field).

In working hands-on with workers’ compensation accounts in the drycleaning industry and in speaking with numerous owners in the Hampton Roads, Va. area, six tips are identified here that drycleaning owners and managers can consider when selecting workers’ compensation insurance.

These tips could not only save your operation a significant amount of money, but also help protect your business from lawsuits, decreased production, and lowered team morale:

TIP ONE: THE ‘EMR’

Every business owner or manager should obtain a detailed review of their Experience Modification Rate (EMR) for their workers’ compensation plan.

Note: Experience Modification Rate, or EMR, according to Wikipedia, is a term used in the American insurance business, specifically in workers’ compensation insurance, to determine the adjustment of annual premium based on previous loss experience, usually three years.

If your business meets minimum premium qualifications, then it automatically qualifies for an EMR rating.

This EMR rating compares the losses of your business with similar businesses to determine if your claims are better or worse than expected and then modifies your premium accordingly.

For example, a business with a .75 experience modification factor will save 25% on workers’ compensation. A business with a 1.25 experience modification factor will pay 25% more than the standard premium.

The National Council on Compensation Insurance (NCCI), which gathers data, analyzes industry trends, and prepares objective insurance rate and loss cost recommendations, is the organization that calculates experience modification factors.

Sometimes, errors can be corrected within a prescribed time frame of a policy renewal, so it is vital that you verify your experience modification factor with your agent.

TIP TWO: JOB CLASSIFICATION

Every owner and manager should check their job classifications and payroll.

Businesses typically have employees spanning several different job categories. Each employee will be classified in the highest rated category for the type of work they do.

For example: workers’ compensation is fundamentally broken down per job category that is held within your company (cleaners, delivery personnel, front desk, administration, etc.) and the payroll amounts designated for each of these job sections.

If your policy is covering all of your employees at a higher-risk-level job, your premiums would typically be higher than if you segmented these jobs out.

An example would be seen in the difference between a job classification of a route driver vs. an administration person who performs office functions.

Since there is more opportunity to be injured as a driver than typically as an admin team member, the costs associated would typically be higher for the former.

However, it’s important to review the job classification for each individual to ensure that each employee is classified properly and you are not paying for a higher job class.

While an audit may correct any discrepancies after the fact, a comprehensive review of job classifications and payrolls when you start or renew a policy can keep your cost down throughout the year.

TIP THREE: CERTIFICATES FOR CONTRACTED WORK

Every owner and manager should maintain certificates of insurance for all contracted work.

Businesses are responsible for and are charged for workers’ compensation on all contracted labor unless the business has a current certificate of insurance on file for the contracted company. This can include contractors used for building repairs, janitorial cleaning operations, auto fleet maintenance, etc.

It is prudent to retain this certificate on file for each vendor you utilize and to obtain the certificate before work begins on a project.

Filing the certificates in a single place will streamline your workers’ compensation audit and ensure that you do not miss any vendors and inadvertently get charged for their work.

Check back Thursday for the conclusion.

About the author

Kelley Carter

Braun Agency, Nationwide

Marketing Director

Kelley Carter, CPIA, is the marketing director and a licensed agent with the Braun Agency, Nationwide.

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