Date post: | 26-May-2015 |
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Financial Impact of Work-Related Injuries
Presented by: The Murphy Insurance Group
Today’s Agenda
Promoting Safety
OSHA Penalties
Uninsured Cost of Loss
Experience Modification Factor
Workers’ Compensation Pricing Programs
Summary – Your Return on Investment
Promoting Safety
Top 5 Goals of Promoting Safety
1. Bring safety out of the back room and into the boardroom.
2. Change employee health and safety from reactive to proactive
by establishing a safety culture.
3. Make safety an enterprise value, not just a cost center.
4. Remove subjectivity; use objective tools to quantify.
5. Compete successfully for limited budget dollars.
“Minimizing loss is as much improvement as
maximization of profit.” – Louis Allen, Risk Management Expert
Promoting Safety
Traditional Approach
It’s the right thing to do
People are important
Safety improves productivity and quality
We need to consider OSHA regulations and penalties
Workers’ compensation costs have to be controlled
All true statements, but also consider the value of metrics …
Promoting Safety
The Value of Metrics
Through metrics, we are able to make a true business decision regarding safety
What gets measured gets managed
We can successfully quantify safety using the tools presented today, such as using the Safety Budget Worksheet
Promoting Safety
The Safety Budget Worksheet allows us to develop a reference point for:
– Cost-benefit analysis
– The value of prevention
As we use metrics to support safety initiatives, we still need to be mindful of the ethical importance to protect human beings.
Promoting Safety
Adopt a Safety Philosophy
“Working safely requires solid job knowledge, effective supervision and disciplined, alert work execution. Maintaining this excellence over an extended period of time is the mark of a superior organization. It is more than not getting someone hurt, it is a command of the business you are engaged in.”
Robert C. Olsen
Production Manager, EPMI
Agenda
Promoting Safety
OSHA Penalties
Uninsured Cost of Loss
Experience Modification Factor
Workers’ Comp Pricing Programs
Summary – Your Return on Investment
OSHA’s View on Penalties General Policy. The penalty structure provided under Section 17 of the Act is designed primarily to provide an incentive toward correcting violations voluntarily, not only to the offending employer, but also to other employers who may be guilty of the same infractions of the standards or regulations.
OSHA Penalties
a. While penalties are not designed primarily as punishment for violations, the Congress has made clear its intent that penalty amounts should be sufficient to serve as an effective deterrent to violations. b. Large proposed penalties, therefore, serve the public purpose intended under the Act; criteria guiding approval of such penalties by the Assistant Secretary are based on meeting this public purpose. (See OSHA Instruction CPL 2.80.) c. The penalty structure outlined in this section is designed as a general guideline. The Area Director may deviate from this guideline, if warranted, to achieve the appropriate deterrent effect.
OSHA Penalties
Willful Minimum: $5,000 Maximum: $70,000
Repeated Maximum: $70,000
Serious, other than serious, or other specific violations
Maximum: $7,000
Failure to abate Maximum $7,000 per day for each day violation continues beyond abatement date
Violating posting requirements (failure to post OSHA poster, OSHA 300 Annual summary, citations, etc.)
Maximum: $7,000
Failure to report fatality or catastrophic event within eight hours
Maximum: $7,000
Providing advance notice of inspection $1,000 fine or up to six months in jail or both
OSHA PENALTY SCHEDULE
OSHA Penalties
Gravity-Based Penalties (GBP)
An unadjusted penalty is based on severity and probability. GBP may be reduced due to:
– Good Faith
– Size of Business
– History of Previous Violations
OSHA Penalties
Penalty Adjustment Factors
No adjustment given if any violation is classified as willful
Small business adjustment stops at 250 employees
No adjustments given in the absence of a written safety and health program (could be required under Draft Proposal Safety & Health Program Rule, 29CFR1900.1)
OSHA Penalties
Severe Violators Enforcement Program
Those who willfully and repeatedly endanger workers are charged maximum fines and will receive special attention from OSHA in the way of increased inspections and regulatory controls.
Agenda
Promoting Safety
OSHA Penalties
Uninsured Cost of Loss
Experience Modification Factor
Workers’ Compensation Pricing Programs
Summary - Your Return on Investment
Uninsured Property Damage Costs
Uninsured Miscellaneous Costs
Insured Costs
• Medical
• Compensation
• Building Damage
• Tool & Equipment damage
• Product & Material Damage
• Production delays & interruptions
The Real Cost of Accidents Can Be Measured and
Controlled
$1
$4 to $10 • Investigation time
• Cost of hiring and/or training
replacements
• Overtime
• Extra supervisory time
• Clerical time
• Wages not compensated
• Down time
• Negative public image
• Legal fees
• Reduced Employee Morale
The Tip of the Iceberg
Uninsured Cost of Loss
Injured Employee: Lewis Laceration DOL ______________
Dispensary Only _________ Outside Medical _________ Lost Time Case _________
WAGES
1. Injured EE time (Not covered by WC) …………………… Rate: $10.00 X Hours: 30 = $300.00
2. Medical visits while on light duty ……………………………..Rate: $10.00 X Hours: 4 = $40.00
3. Decreased productivity while on light duty ………………..Rate: $10.00 X Hours: 20 = $200.00
4. Employee(s) giving aid ………………………………………...Rate: $10.00 X Hours: 3 = $30.00
5. Employees watching, discussing ………………# EE’s: 6 X Rate: $10.00 X Hours: 2 = $120.00
6. Supervisor/Mgr Investigating & Reporting …………………...Rate: $20.00 X Hours: 3 = $60.00
7. Supervisor rescheduling/training ……………………………….Rate: $20.00 X Hours: 2 = $40.00
8. Office: Preparing reports & managing case ………………….Rate: $10.00 X Hours: 1 = $10.00
9. Reactive Safety activities ……………………………………………..Rate: $- X Hours: - = $50.00
10. Overtime required ………………………………# EE’s: 1 X Rate: $10.00 X Hours: 20 = $200.00
11. Other …………………………………………………………………………………………………..$0
SUBTOTAL ………………………………………………………………………………………..$1,050.00
OTHER COSTS
12. Medical Paid by employer ……………………………………………………………………………$-
13. Clean up cost …………………………………………………………………………………….$55.00
14. Transportation Expense………………………………………………………………………...$25.00
15. Production decrease/downtime ………………………………………………………………$150.00
16. Product or equipment loss …………………………………………………………………………...$-
17. Replacement of first aid supplies ………………………………………………………………$10.00
18. OSHA penalties ……………………………………………………………………………………….$-
19. Deductible ……………………………………………………………………………………………..$-
20. Miscellaneous overhead ……………………………………………………………………………..$-
21. Other ……………………………………………………………………………………………………$-
SUBTOTAL…………………………………………………………………………………………$240.00
22. Total Uninsured Cost ……………………………………………………………………..$1,290.00
Uninsured Cost of Loss - Injury example
Employee suffers serious arm laceration four hours into shift:
– Misses work three days
– Two follow-up visits for observation/therapy
– Clinic is about 15 minutes away
– Employee wage rate - $10/hour
– Supervisor wage rate $20/hour
– Back to work on Light Duty restrictions
– Restrictions last for 10 days
Uninsured Cost of Loss
Utilizing the Uninsured Cost of Loss worksheet, we can help you identify areas for consideration and improvement.
Agenda
• Promoting Safety
• OSHA Penalties
• Uninsured Cost of Loss
• Experience Modification Factor
• Workers’ Comp Pricing Programs
• Summary – Your Return on Investment
Experience Modification Factor
Overview
Benchmark tool used to compare actual losses to expected losses
1.00 is average
– Lower than 1.00 is better than average
– Higher than 1.00 is worse than average
Measures dollars, not number of claims
Based on a rolling three years
Used as a multiplier for premium calculation
Experience Modification Factor
Estimating a mod Compare claims for the year dropping off with the year coming on. The estimate
will be skewed if the claims in either year had one very large claim or if payrolls
were significantly different.
2011
Mod - Factor
2010
Claims
$35,238
2009
Claims
$84,472
2008
Claims
$100,393
Experience Modification Factor
Financial impacts of controlling the mod:
If the mod is consistently low, there’s a quantifiable financial benefit to keep it from going up.
If the mod is consistently high, there’s a quantifiable financial benefit to bring it down. Potential savings could pay for a safety facilitator.
If the mod has fluctuations, smoothing it out at a lower level would relieve some budgetary frustration.
Agenda
Promoting Safety
OSHA Penalties
Uninsured Cost of Loss
Experience Modification Factor
Workers’ Compensation Pricing Programs
Summary - Your Return on Investment
WC Pricing Programs
Workers’ compensation (WC) rates are priced in one
of three ways:
1.Monopolistic states:
• State-run WC programs
2.Price-administered states
• State establishes WC rates
• Dividends payable post-expiration
3.Competitively rated
• Each insurance carrier establishes rates by using
credits or debits
WC Pricing Programs
• Guaranteed cost – most typical
• Dividend plans - state specific
• Retrospective (Retro) plans
• Self-insured – suited for large employers
• Deductible – suited for large employers, varies by state
Agenda
Selling Safety
OSHA Penalties
Uninsured Costs
Experience Modification Factor
Workers’ Compensation Pricing Programs
Summary – Your Return on Investment
Summary – Return On Investment
By focusing on the following:
OSHA compliance
Managing uninsured costs through safety initiatives
Controlling your experience modification through a proper safety program
Building a Safety Culture
You will be able to obtain the most attractive WC pricing program, resulting in a bottom-line return on your investment!
The bottom line?
Savings!
Summary – Return on Investment
We have the loss control experience and programs to help you manage and
reduce the financial impact of work-related injuries.
The Murphy Insurance Group
THANK YOU FOR ATTENDING!
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