When a commercial insurance carrier urged one small producer to find alternative workers' compensation coverage because of frequent accidents and claims, Brian Gilbert, president of Gilbert Block Co., Laconia, N.H., became motivated to make major improvements.
He joined five other producers in an insurance trust, where members decide who can join. Entrants must have 1.3 or lower mods and loss ratios of 65% or lower. New members must be committed to meeting the trust's standards and keeping everyone's premiums down.
In the event a member company has a fatal accident or a one-year loss ratio (payouts vs. premiums paid) around 100%, the trust's nine-member board of directors would vote on whether to remove the member company in question. So far, this has not happened.
Gilbert's own employees benefit from lower costs in the form of consistent pay raises. His hands-on approach to preventing workers' compensation fraud has paid off as well.
The trust is a clearinghouse for services that aid continuous safety improvement, including a claims administrator and safety consultants who are paid by the trust. A former OSHA inspector and another safety consultant also work for the trust, specializing in preventive maintenance. Every quarter, the company gets an inspection from a consultant, who concentrates on a chosen area of safety. The consultants summarize their findings in a written report and then make a return visit to provide feedback on the firm's progress in correcting safety problems found during the inspection.
In addition, the consultants lend assistance in catastrophic situations and can reduce the amount of an OSHA fine.
The savings on their annual premium now goes toward many other, better things like a new truck chassis or a piece of production equipment every year.
Self-insurance trusts are permissible in about 30 states. The first step is finding out which state agency (Labor, Insurance, Industrial Relations or Workers' Compensation Commission) oversees insurance. If your state allows trusts, request and complete the necessary paperwork before seeking out providers of 1) coverage administration and 2) excess (catastrophic) insurance, which is almost invariably required.
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