The savings in security

Safety is thought of as a compassionate issue or an improvement of the work environment. The care and consideration that management puts into safety issues is considered an indicator of attention to detail and teamwork. Security is all of those things; but it is also a “profit center” that must be monitored by management. Put clearly: The most secure companies are more profitable!

The cost of a poor security program:

The costs of security incidents add up quickly. The company must pay: the injured worker(s) for their time during the incident, employees responding to the injury, those completing paperwork, and office staff working with the company insurance, medical providers, inspectors and government officials. But it does not stop there! When incidents occur, materials or equipment can be damaged, insurance rates can increase (including Worker’s Compensation rates and general liability rates), and productivity is greatly affected as workers discuss the incident. or perform their tasks too cautiously. Then there is the increasing possibility of OSHA and/or other government inspections and fines. Interestingly, most companies are responding to a security breach and the increasing expense report associated with emergency training programs, new security equipment, and increased monitoring of operations, adding even more costs.

Just as a poor or non-existent security program can cost, a good security program can save! Savings can be added directly to earnings or used to get more work through reduced bid prices or lower service charges. Eliminating or minimizing security incidents will eliminate or reduce all of the potential costs listed above. Additionally, a clean safety record will also lower insurance premiums.

Real money made safely:

Companies with a history of no incidents, or minor incidents, can see their insurance premiums drop as much as 75% of what their competitors are paying for the same policy; while a poor incident history can lead to paying insurance premiums of up to 300% of the going rate. Since Worker’s Compensation insurance is required in all states by federal law and General Liability insurance is required by governments at various levels, as well as by most customers, insurance premiums are one of the elements most important in most annual budgets. Savings in this area translate directly into savings in the cost of doing business.

Insurance companies report Workers’ Compensation loss information to their state reporting office or to the National Council for Workers’ Compensation Insurance (NCCI), depending on state code. This information is used to generate an Experience Modification Rating Factor (EMR), also known as an Experience Rate Modifier (ERM), for the state or region. Those companies with an average security incident history, based on a comparison of the losses paid by insurers to cover the claims, receive a score of 1.0. Companies with a better track record (fewer losses) will have an EMR of less than 1.0 which can drop as low as 0.75. Conversely, companies with a low average incident cost history may see their EMR rise as high as 3.0.

The company’s EMR is used each year to determine the proposed premium price offered by insurers to win the company’s insurance business. Therefore, those companies with an EMR of 0.75 will pay only 75% of the premium that the average competitor in their state is paying for insurance, while companies with an EMR of 3.0 will pay three times (or 300%) the premium of its competitors. Additionally, those companies deemed lower risk (less than 1.0 EMR) will find that insurers looking to win their account may also discount their price even further, up to an additional 15%, after calculating the EMR-affected price. Therefore, security savings are accumulated on top of security savings.

Know your EMR and improve it:

The EMR is based on a three-year rolling period, not counting the most current year as those losses are still unfolding. It is rarely calculated using calendar years as the term, but rather as policy years. Therefore, if your policy renews on June 4 of each year and is in effect from June 4 through June 3 of the following year, your EMR will reflect the previous three full policy years.

Your insurance agent can provide you with your company’s EMR from the ratings office report and should be able to explain ways to improve it. It will change from policy year to policy year as previous years leave and newer years are added. Also, many states’ formulas add a weighting system, so newer years weigh more in your EMR than older years. This works to your advantage if you have had high cost incidents in the past and have taken steps to improve your security program. It is important that you review your losses with your agent six (6) months prior to your renewal term to ensure there are no open claims or claims that can be reduced, before the insurance company submits the “Unit Stat” report. statisticians) with the qualification office. The formula that generates the EMR can be difficult to understand if you’re not an insurance expert, so your agent should be a trusted advisor and successful partner to your business.