Employers Seek Solutions to Lower Workers' Comp Insurance Costs

Dec. 16, 1999
As workers' compensation premiums start to increase, California employers look for ways to reduce insurance costs.

Anticipating workers' compensation premium increases of 12 to 20 percent next year, California employers are turning to deductibles and other innovative programs to reduce insurance costs, according to a leading Bay Area insurance broker.

"California is seeing the effect of several years of insurance company losses on workers' compensation claims, despite the 1993 legislation that was expected to overhaul the system," said Carl A. Santa Maria, president of risk management services for Tanner Insurance Brokers.

The 1993 reforms, designed to reduce fraud and increase competition among insurers, succeeded in reducing the number of claims by 40 percent. However, the cost of the average claim in 1998 rose 47.5 percent, from $17,167 to $25,318, according to a study by the nonprofit California Workers' Compensation Institute.

Even higher claims are predicted as a result of new rules, extending benefits for ergonomic injuries, that are expected to be issued soon by the Occupational Safety and Health Administration.

Santa Maria noted that the state insurance commissioner already has authorized an average premium increase of 18.4 percent for the next year.

"Almost every company is expected to increase rates at least 12 percent," said Santa Maria.

"It's too early to tell what most of our clients will do," said Santa Maria. "But we're finding that almost every major client is going to make changes to reduce costs."

The most common option so far is to take more risk, using insurance plans that reward claims reduction. "Companies choosing these plans are working closely with our company to review and modify working practices in order to minimize employee injuries and claims," said Santa Maria.

Santa Maria also expects to see an increase in the number of companies that are going to self-insurance, rather than purchasing insurance on the open market. "If a company has a good record and can qualify financially, it does not have to purchase workers' compensation insurance," he explained.

About the Author

EHS Today Staff

EHS Today's editorial staff includes:

Dave Blanchard, Editor-in-Chief: During his career Dave has led the editorial management of many of Endeavor Business Media's best-known brands, including IndustryWeekEHS Today, Material Handling & LogisticsLogistics Today, Supply Chain Technology News, and Business Finance. In addition, he serves as senior content director of the annual Safety Leadership Conference. With over 30 years of B2B media experience, Dave literally wrote the book on supply chain management, Supply Chain Management Best Practices (John Wiley & Sons, 2021), which has been translated into several languages and is currently in its third edition. He is a frequent speaker and moderator at major trade shows and conferences, and has won numerous awards for writing and editing. He is a voting member of the jury of the Logistics Hall of Fame, and is a graduate of Northern Illinois University.

Adrienne Selko, Senior Editor: In addition to her roles with EHS Today and the Safety Leadership Conference, Adrienne is also a senior editor at IndustryWeek and has written about many topics, with her current focus on workforce development strategies. She is also a senior editor at Material Handling & Logistics. Previously she was in corporate communications at a medical manufacturing company as well as a large regional bank. She is the author of Do I Have to Wear Garlic Around My Neck?, which made the Cleveland Plain Dealer's best sellers list.

Nicole Stempak, Managing Editor:  Nicole Stempak is managing editor of EHS Today and conference content manager of the Safety Leadership Conference.

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