Companies Are Tightening Their Belt By Reducing The Financial Waste And Inefficiency From Workers Compensation Injuries

In these challenging economic times virtually every company is looking for ways to reduce codes and improve operating efficiency. While reducing workers compensation premiums is certainly one way to do this, more and more companies are taking a fresh new look innovative, easy-to-use, enterprise risk management solutions.

In my last blog I discussed the importance of calculating the TOTAL COST claims. Industry statistics consistently indicate that only 25–40% of the total cost of workers compensation claims is transferable to your insurance carrier. In fact, the average CompEraser customer incurs $1.38 in indirect, uninsured cost for every $1.00 of insured costs. These “uninsured costs” are the result of the marginal inefficiencies to your manufacturing or service process as a result of a work-related injury.

As an example of what this can mean to your organization let me give a “real life” example. Recently CompEraser was asked by a company to estimate their TOTAL COSTS using five years of prior workers compensation loss experience. This company had always done a good job of shopping their workers compensation coverage and also felt that they were doing a good job in their safety efforts. However, on average they were still experiencing an average of $72,428 in incurred workers compensation claims each year. Management was looking for every way to further reduce costs were interested in looking under every rock.

Below is the result of our study based upon CompEraser’s average ratio of direct to indirect costs and the customer’s pre-tax profit of 3.5%.

The sales required to pay for this organization’s total workers compensation costs was 17.6% of their total annual sales. In fact, with the economy being what it is and their sales falling management estimated that these cost were account for 21.7% of projected 2009 sales! In addition, management estimated that they were hiring 6 people to produce these sales. As one manager put it, “It is almost like we have a phantom department on our payrolls.”

But we did not stop there. Using our patent-pending application we then were able to evaluate many potential drivers of these costs. We looked at not only the traditional cause of loss, nature of loss and body part criteria. We also analyzed their claim reporting lag time, unsafe acts, unsafe conditions, the performance of every supervisor and department, the response time of doctors, and their litigation rate. Based upon this analysis we identified three key cost drivers that, if eliminated, would bring 85% of these loss sales back to their “top line” and bring approxiately the same percentage to their bottom line profit. The cost was estimated to be less than $4,500 – a fantastic return-on-investment by any standards.

CompEraser evaluates your claims data – automatically – and provides crystal-clear reports, charts and graphs that zero in on your hot-spots and problem areas. Is there a division, department or supervisor with a high accident rate?  What about a specific location, job site, task or process?  Maybe there’s a problem on a particular shift or at a particular time of day.  What are my TOTAL COSTS from these injuries? How can you really be sure? With CompEraser you can!

Just some of the many features include:

Ø  Cost allocation by Division, Location or Job Site, Department, Supervisor, or Shift by any timeframe selected;

Ø  Each “Analysis Report” allow you to quickly jump to mini-financial reports for each category. Ideal for drilling down quickly and efficiently;

Ø  Loss productivity, as measured in lost days, displayed for each category;

Ø  Frequency graph provided to reveal where most injuries occur;

Ø  Severity (TOTAL COST) graph provided to reveal where cost are generated;

Ø  All data can be easily exported for further analysis and cost allocation.

CompEraser also includes valuable resources to help you formalize your safety team, implement effective injury prevention strategies, safety training toolkits, prompt injury response and workers compensation disability management resources, plus more. These resources are available 24/7 and used irrespective of which workers compensation carrier you select. Its patent-pending technology also provides unique financial reports for monitoring the effectiveness of your safety and health program on an on-going basis. For more information visit our website at www.CompEraser.com.