Business

The savings on 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 seen as 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 plainly: Safer 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 who respond to the injury, those who fill out paperwork, and office staff who work 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 respond to a security lapse and associated rising expense report with emergency training programs, new security equipment, and increased monitoring of operations, adding even more costs.

Just as a poor or nonexistent 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 sale 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 to as low 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 rating office or the National Council for Compensation Insurance (NCCI), depending on state code. This information is used to generate an experience modification rating (EMR) factor, 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 losses paid by insurers to cover claims, receive a rating of 1.0. Companies with a better track record (lower losses) will have an EMR of less than 1.0 which can drop as low as 0.75. Conversely, companies with a low history of average incident costs may see their EMR rise to 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 your 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 further, up to an additional 15%, after calculating the EMR-affected price. Therefore, security savings accumulate on top of security savings.

Know your EMR and improve it:

The EMR is based on a rolling three-year period, not counting the most current year as those losses are still developing. It is rarely calculated using calendar years as the term, but rather as policy years. So, if your policy renews on June 4 of each year and is effective 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 rating bureau report and should be able to explain ways to improve it. It will change from policy year to policy year as older years are gone and newer years are added. Also, many states’ formulas add a weighting system, so newer years weigh more on your EMR than older years. This works in your favor 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 may be reduced, before the insurance company files the “Unit Stat” report. statistics) with the rating 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.

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