Workers and Management Form a Coalition to Stabilize Workers’ Compensation Costs
A coalition is an alliance between individuals or groups, during which they cooperate in joint actions, each in their own interest, joining forces for a common cause. Workers and management in the West Virginia building trades have done just that in their joint effort to control workers’ compensation insurance costs. Recognizing the benefits of training, drug testing, and proactive communication in reducing workplace injuries, workers and management combined efforts and created an insurance program that repays the benefits of reduced losses. due to work accidents. The insurance program is known as Group Captive, and it not only provides essential workers’ compensation coverage, but rewards participants with superior training and loss prevention.
The alliance
Too often, the discussion in the media on the topic of work and management focuses on their conflict. Disagreements over collective bargaining, organizing, political fundraising, benefits, and foreign competition fill the newspapers. After a heavy dose of this conflict, it’s easy to forget that the parties and people involved have a lot in common. The craftsman is an employee of the contracting employer. In other words, they work in the same company with common goals and objectives. The two of you work together on the bidding and completion of a construction project that offers compensation and personal satisfaction. Each profit when the project is completed on time and within budget; the contracting employer through profits and the merchant through better wages and benefits. It is undeniable that when construction projects are not profitable, both labor and management lose.
When the employer and his employee look for ways to work together in an effort to jointly advance their own interests, the cost of running the business inevitably comes up. One operating expense that the tradesman and contractor can team up on is workers’ compensation insurance. The expense of financing losses arising from injured workers is no small part of a contractor’s operating budget. This is especially true for contractors who employ the construction trades whose skill and training command a higher salary. Since the workers’ compensation insurance premium is determined by multiplying the premium rate by payroll, union contractors pay more for workers’ compensation insurance than their competitors who employ lower-wage, non-union labor, even though training of unionized dealers and focus on safety would suggest a more attractive claim outcome. The insurance pricing anomaly exhibited by union contractors can be mitigated when workers and management cooperatively share risk through a Group Captive.
Join forces
Even before Group Captive was implemented, the building trades in West Virginia joined forces with contractors in developing a world-class training program in response to claim activity on individual job sites. Tracking claims activity began as a method of quantifying the benefits and need for specific training topics. Certified and experienced experts regularly provide hands-on instruction to both apprentices and veteran craftsmen. Training includes courses in equipment operation, safety, and loss prevention. Thousands of hours are spent developing and enhancing the skills deployed on each construction project. This is unique to the union labor market as higher wages partly finance specialized apprenticeship training facilities for the aforementioned trainers to educate apprentices and craftsmen. Workers and management also joined forces to develop a credible drug testing program that gave both workers and management confidence in the accuracy, fairness, and integrity of the tests. While Department of Transportation programs test based on a five-panel screen, the building trades in West Virginia conduct a higher level of testing.
These programs continue to improve through regular meetings where workers and management share ideas, obstacles, and solutions to delivering the most effective safety and training programs available. These meetings are held at least quarterly and are aimed at an open dialogue on the challenges faced by the participants. Challenges are best resolved face-to-face with a candid discussion. This works for training curriculum, drug testing, communication, and security. In fact, the benefits of open, clear, and regular communication are further embraced by workers and management in this insurance program through the implementation of a problem solver. Collection and loss prevention programs that are available to contractors are implemented in a timely and efficient manner. A combined workforce and management are focused on reducing workers’ compensation expenses.
Make the Return
With the groundwork laid for the effective control of workers’ compensation costs by the cooperative efforts of labor and management, an insurance program was needed that offered participants the highest return for their outstanding loss results. . A group captive offered employer contractors the best opportunity to earn a return on underwriting and investment income from workers’ compensation premiums. A group captive is an insurance company that is owned and/or controlled by its policyholders. In this case, the insured are employer contractors, and are the participants of the Group Captive.
Group Captive participants buy insurance the same way they do in the standard marketplace; they submit their subscription information, receive a quote, and bind coverage. A Group Captive insurance program provides the necessary infrastructure for claim payment delivery, including a claims administration company or TPA, an insurer to write the policies, and a reinsurer to cover large or unforeseen loss events. The Group Captive then adds a Captive insurance facility that is controlled by the group to take on a portion of the risk normally retained by the insurer. La Cautiva de Grupo operates like any other insurance company and reports its financial performance with premium income, loss payments, expenses and investment performance activity to its owner contractors.
Through the retention of risk in the Captive and the application of programs designed to prevent and reduce workers’ compensation losses, the Group’s Captive participants can experience technical results that allow a return on technical and investment income. Without the involvement of the Captive by the employer’s contractors, these positive underwriting results would have been to the sole benefit of the insurance company. The return on underwriting and investment income obviously reduces the expense for union contractors of insuring their workers’ compensation and offers a cost advantage over traditional insurance coverage.
Works?
The proof is in the numbers. Do Employer Contractors Get Savings Compared to Buying Traditional Workers’ Compensation Insurance? A review of the historical premiums and losses of more than 30 different union contractors was revealing. On average, the contracting employer could realize a 20 to 30 percent reduction in expenses by participating in Group Captive. This revelation is causing the idea to flourish with over thirty contractors applying to participate in the captive group from West Virginia. In fact, Group Captive’s approach is spreading to neighboring states where the same labor management coalition is taking hold. An exciting development that can truly be described as a ‘win win’ for all involved.