The Savings in Safety

special section: safety & health EXECUTIVE Construction October 2011 T H E M A G A Z INE F O R T H E B U SINESS O F CONST R U CTION Making Accident Prevention Every Worker’s Responsibility Strength Sainfety

[ ]S p e c i a l S e c t i o n : S a f e t y & H e a l t h The Savings in Safety S By Christian D. Malesic afety is often thought of as a workplace environment issue, or Many companies respond to a break- as an indicator of how much management pays attention to down in safety—and the associated detail and teamwork. Safety is all of those things, but it also expenses—with emergency training pro- should be seen as a profit center. To put it simply: Safer com- grams, new safety gear and increased panies are more profitable. operations monitoring, which adds even more costs. Just as a poor (or nonexistent) safety program can be costly, a good safety program can provide savings to be put toward profit or used to garner more work The Cost of a Poor Safety Program materials or equipment can be damaged, through reduced bid costs and lower ser- The costs of safety incidents build up insurance rates can increase (includ- vice charges. Minimizing safety incidents quickly. For example, a company must ing workers’ compensation and general will eliminate or reduce all of the afore- pay injured workers for their time, pay liability rates), and productivity can mentioned costs, as well as reduce insur- SuperStock/Getty Images employees who respond to the injury and decrease as workers discuss the incident ance premiums. complete the paperwork, and pay office or perform their tasks over-cautiously. personnel who work with the insurance Then, there is the possibility of inspec- The Real Money Made in Safety company, medical providers, inspec- tions and fines from the Occupational Companies with a history of zero or only tors and government officials. And it Safety and Health Administration or minor safety incidents could see their doesn’t stop there. When incidents occur, other government agencies. insurance premiums drop 75 percent |30 Construction Executive October 2011

[ ]S p e c i a l S e c t i o n : S a f e t y & H e a l t h compared to what their competitors pay A company’s EMR Insurance agents can provide the com- for the same policy. Conversely, poor determines the pany’s EMR from the rating bureau report incident history can lead to paying insur- and explain ways to improve it. The EMR ance premiums up to 300 percent of the proposed premium changes from policy year to policy year as going rate. Because workers’ compensa- price offered older years drop off and newer years are tion insurance is mandatory in every state each year added. Moreover, many states’ formulas add and general liability insurance is required by insurers. a weighting system so newer years weigh by governments at various levels, as well more heavily in the EMR than previous as by most clients, insurance premiums premium of their competitors. Companies years. This benefits companies that had are one of the larger items in most annual considered low risk (less than 1.0 EMR) high-cost incidents in the past and have budgets. Savings in this area translates may enjoy additional discounts, as high as taken steps to improve their safety programs. directly to savings in the cost of doing 15 percent. business. Contractors should review losses with Stay Informed an agent six months prior to the renewal Insurance companies report workers’ The EMR is based on a rolling three-year term to make sure no open claims or compensation loss information to their period, not counting the most current year claims that can be reduced exist before the state rating bureau or to the National because those losses are still developing. It insurance company files the “Unit Stat” Council on Compensation Insurance, rarely is calculated in calendar years, but report with the rating bureau. The for- depending on state code. This informa- rather in policy effective years. If a compa- mula that generates EMR can be difficult tion generates an Experience Modifica- ny’s policy renews on June 4 each year and to understand for non-insurance experts, tion Rating (EMR) factor for the state is effective from June 4 through June 3 of which is why an agent should be a trusted or region. A company’s EMR determines the next year, the firm’s EMR reflects the advisor and a long-term partner with the the proposed premium price offered each previous three full policy-effective years. company. year by insurers. Companies with a 0.75 EMR pay only 75 percent of the premium Christian D. Malesic is founder and presi- the average competitor in their state pays dent of CM Squared, Inc., Full Service Elec- for insurance, while companies with a 3.0 tricians, Harrisburg, Pa. For more informa- EMR pay three times (or 300 percent) the tion, follow Malesic on Twitter @CDMalesic. |32 Construction Executive October 2011