Reducing Your Business’ Workers’ Compensation Costs and Liability

Every employer should maintain the important goal of reducing work-related injuries to their employees as much as possible.  Not only is this the ethically and morally right step, but it can prove to help an employer with their bottom line.  By taking steps to reduce work-related injury, an employer may be able to reduce the workers’ compensation premiums paid, the risk of serious and willful claims, or the risk of a 132a issue arising.  There are some good steps that any employer can take to reduce his or her business’ workers’ compensation costs and liability for future costs.

First, almost all employers are required to maintain workers’ compensation insurance in the state of California.  There are some exceptions, but by and large, failure to adhere to this requirement can result in hefty penalties, both civil and criminal, for an employer.  Like shopping for health insurance or life insurance, a business owner should get more than one quote for workers’ compensation insurance.  Getting competitive quotes can help to reduce the ultimate cost of insurance premiums.

Second, an employer must pay special attention when submitting insurance information.  This is two-fold.  An employer must first be accurate when submitting information to the insurance company to purchase the policy, as well as keep the information updated.  Moreover, when submitting information about any work-related injury to the insurer, the employer must also be certain to submit accurate and detailed accounting of what happened, together with the necessary paperwork and witness statements.  Although an employer may be initially convinced that not reporting all his or her employees for the premiums or maybe omitting certain details of an injury will help reduce the up-front cost, this is fraud and can ultimately cost the employer much more in penalties.  It   can also end up resulting in no insurance at all to help with the costs.

Third, an employer can implement a good, solid safety program.  Some employers choose to set up safety committees made up of employees, to help create safety policies as well as help implement safety programs.  Rotating the members on the committee as well as making changes to a safety program on a regular basis can help keep the program fresh and keep employees from becoming complacent.

Finally, an employer can create an incentive program to adhere to safety standards.  Financial bonuses, trips, or extra time off for meeting certain safety goals can help create a work-place atmosphere that encourages adhering to safety standards.

If you have questions about how you can reduce your business’ workers’ compensation costs and liabilities, contact me today at (714) 516-8188.  We can discuss your business and what we can do for its financial future.

State Compensation Insurance Fund

Under California law, almost all employers are required to maintain workers’ compensation insurance.  This insurance will cover the costs of medical treatment for an employee who sustains injury while working on the job.  California law provides harsh criminal and civil penalties for those employers who fail to abide by this requirement.  In some cases, though, an employer may have difficulty obtaining insurance.  Some companies provide services that are considered “high risk,” and so insurance companies are reluctant to provide insurance to those companies. 

To address this problem, the California State Labor Department created the Workers’ Compensation Joint Underwriting Associations.  The purpose of the WCJUA is to provide a resource for those high risk employers who have a hard time purchasing workers’ compensation insurance.  The primary WCJUA in California is called the State Compensation Insurance Fund (SCIF).  The SCIF may provide workers’ compensation insurance to those businesses that are otherwise unable to obtain coverage on the open market.  SCIF is a non-profit organization and provides the same services as other workers’ compensation insurance providers.  Although the SCIF was established by the California state legislature in 1914, it is not a branch of the California government.  SCIF provides insurance to all types of employers, but is an especially crucial resource for those employers who are unable to purchase insurance elsewhere.  The types of employers who are typically in need of insurance through SCIF are new business owners, business owners with poor premium payment history, or those in a high risk industry.  Typically, in order to be considered hard to place or high risk, an employer must have been rejected by at least three other open-market insurance companies.

There are some drawbacks to the system.  Employers should be aware that even though the state has made it possible for them to buy insurance despite being high risk, the premiums will still be higher than they otherwise would be if they were not engaged in a high risk industry.  The underwriting guidelines for the SCIF are also exceptionally strict and subject to heavier state regulations.  The application is long and meticulous, taking up to a month to obtain an insurance policy.  Finally, out of state work is often excluded from coverage.  If a business has branches in other states, the business may have to purchase insurance in that state as well.  However, on the plus side, the SCIF makes it possible for high risk businesses to comply with the state law requirement to carry workers’ compensation insurance.

Workers’ compensation insurance is a complicated issue and can become further complicated if your business is difficult to place. Call me today at (714) 516-8188 and let me talk with you about your business and workers’ compensation.

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