A newly recognized work-related injury or disease that has recently been studied. Workers who have been exposed to chlorine agents or bleach, have been found to have respiratory problems. The study included 13 cleaning employees - all found to have work-related asthma like symptoms.

Accident year data is often used for statistical comparison analysis. Most of the time when I have Accident Year Data, the information involves:

• The inclusion of all carrier loss and exposure data (or that of a group of carriers or within a book of business)
• Had taken place (regardless of when the losses are reported)
• During a given 12-month period of time as all premium earned,
• With no regard as to when the premium was written, during the same period of time.

I like to refer to this type of data as snapshot data as an employer can hone it on a variable or a given period of time and analyze it very heavily.

The act of recovering the amount paid for a loss by an insurer from the entity that is legally responsible. Subrogation is either granted by the terms of the policy itself or by law. Also abbreviated to subro, it allows carriers to recover losses in the case of a second party's liability in the claim. Subrogation reduces the amount of the loss for the carrier and the insured and can therefore reduce the insured's insurance liability.

The talk of the town has, is now, and will be health insurance. I expect the health insurance discussion to continue for many months into the future. My concern is that employers of all types will even more view Workers Compensation as just a cost of doing business. Who can blame an employer with all the new health regulation changes?

I have posted many cost reduction strategies in the blog. The one strategy that almost always pays dividends in Workers Compensation is when an employer begins to analyze their Workers Comp premiums and begins to question why they are writing premiums checks for a certain amount.

Even with the extra burden of the health insurance changes, being vigilant presently on Workers Comp will lower costs well into the future. Please remember what happens today with Workers Comp can affect your premiums for up to five years under the current E-Mod system.

I had earlier indicated that Montana is a monopolistic state. That was incorrect. Thanks for the emails informing me of my error. I was in a hurry to get the post in before its deadline.

The section of an insurance policy that defines the requirements of both the carrier and the insured. This section includes information about loss reporting and settlement, subrogation rights, and cancellation and renewal policies. This information can be found on the coverage form or declarations page of your policy and should be reviewed carefully.

One of the areas of Workers Comp policies where most of our clients seem to run into problems is the rules and conditions that are in the policy, but not in the Declarations Page. When one of our client sends us their policy, we always read it back to front. The front is the obvious part.

A Workers Comp policy has many rules and regulations that heavily affect areas such as disputing an audit, cancellation, and many other parts just as important as what is in the first few pages. The advice we usually give is to read the policy from back to front, in other words - read the fine print.

Another helpful piece of advice is that not all policies read the same. Each time you switch Workers Comp insurers, the polices can differ greatly after the first few pages. There are state rules that govern the policies. However, the states do not dictate how each policy is to be written in each and every case.

As noted by NCCI(R), Workers Compensation is becoming more expensive per unit of coverage. Knowing what is in your policy is another great cost saver. If you have questions about your policy, email your agent and ask them and/or Google(R) the term.

Reading the policy from back to front may take about an hour. It is an hour well spent.

A group of insurers in a competitive environment who underwrite coverage to insureds based on risk or market dynamics. Usually, employers with low risk (E-Mod) will be placed in the voluntary market. Employers that are more risky may still be placed in the Voluntary Market, but it may be very expensive coverage.

The Workers Compensation market itself may dictate whether a voluntary market for a certain business segment exists or not. Having a low E-Mod is not guarantee that an employer will be placed into the voluntary market.

If an employer cannot be placed in the voluntary market, they will have to turn to the assigned risk markets for coverage or to some type of alternative insurance plan such as a Captive.

According to an Oregon-based report as covered by the Montana Watchdog, Montana is the nation's highest for Workers Comp Costs.

Montana recently produced an RFP for a review of their Workers Comp system. According to the RFP, an outside audit has never been performed for Montana's Workers Comp system. We were going to bid on the RFP, but it was too ambiguous for us to provide a bid.

The other four states that topped the list were Alaska, Illinois, Oklahoma and California. The one that surprised me out of this list was Oklahoma. Oklahoma had basically used Compsource as the state fund, then privatized it on 1/1/10.

I will research the study and each state in turn to see what caused the higher costs.

Prohibited risk is any class of business that has been excluded by the underwriters of an insurance carrier. These classes of businesses will not be insured under any circumstance. This is also known as uninsurable risk.

Preferred risk is any risk that is considered to be a better risk. These risks have a lower expectation of incurring loss and if losses are incurred, they will be less significant. For example, a business who has a effective safety program in place can usually get a reduced rate because the chance of accidents occurring are far less.

This term is seldom used in Workers Compensation. The net loss is the final paid loss regardless of the reserves that were set on the claim. The final paid loss may differ from the Total Incurred if the file was closed after the Unistat Date. The net loss would be reduced if there are subrogation, reinsurance, or Second Injury Fund recoveries. The best term to use with Workers Compensation is Total Incurred.

According to a very recent report by NCCI(R), the downward trend in the number of Workers Compensation claims has continued for 2009. The disappointing factor for cost cutters is that the actual costs per claim have increased. NCCI always does a great job in analyzing data and drawing various conclusions.

My take on the numbers being down with costs increasing are threefold:

• The more complex claims are now prevalent. Companies are shrinking. The number of newer and smaller claims compared to the complex claims is decreasing as the same injury rate applied to a smaller group means less claims.
• Many studies have shown that any worker out six months will not return back to work. Companies may not have the same job available on a return to work. This would push the TTD period beyond six months much more easily resulting in more complex claims.
• There is a self-induced pressure on employees to keep working and not file a claim. This is the basic fear of job loss. I have not seen any studies, but I am sure there is a small "bump up" in claims if and when the economy comes out of a recession due to employees having a lower fear of a job loss if they do report a claim.

If anyone has more to add or disagrees, please post a reply or send me an email.

In workers comp, loss constant is a flat amount added to the premiums of smaller businesses.The purpose of adding loss constant is to off set any unusual or more than average losses or claims. The smaller business can have a higher loss ratio. The Loss Constant offsets the risk of insuring very small businesses.

This is a continuation of my post from yesterday. Please make sure to check out 1 - 5 as these will all save you Workers Comp $$$.

6. The reserve review process must be ongoing. As the insurance carrier will change the reserves when needed, you cannot just review them at random or once per year. The best time to start reviewing your company's reserves is 90 days after your new policy starts. That gives you 3 months to review and negotiate any reserve reductions.

7. As I have posted many times, YOU MUST HAVE ONLINE ACCESS TO YOUR CLAIMS. Waiting for a monthly or quarterly paper loss run is throwing away $$$. Online access is worth paying a little extra for the service.

8. Make sure that you document all communications with any insurance personnel such as adjusters, auditors, agents, customer service. I always recommend sending a letter or email. Phone calls work well as a follow up to your letter or email. Phone calls are not a great standalone documentation tool.

9. Read your Workers Comp policy from front to back before renewal. This is especially important if you are switching insurance carriers. Ask your agent for a copy of the WHOLE policy. You will find some very interesting requirements and agreements from the carrier.

10. Work the numbers from the check you are going to write at renewal back to what was the basis for the charges. This is very TRUE for your yearly premium audit bill. You have the right to know what you are paying for at a renewal or an audit.

11. Bonus Before you renew your Workers Comp policy, ASK QUESTIONS. No one in the insurance industry, even your agent, is going to frown upon your inquiries. Companies that ask questions save $$$.

If you have any questions on the 10 Strategies, please drop me an email at jmoore@cutcompcosts.com or post a reply. Thanks.

Any condition that increases the chance that there will be a loss. Hazard exist in every workplace. Examples could be improper storage of office supplies which contain chemicals, or a slippery floor in a kitchen. Recognizing hazards and correcting them will provide a safer workplace, less risk, and ultimately lower premiums.

If your company's Workers Comp policies renew on January 1, there are at least 10 strategies to implement to cut your costs. The first five are

1. Your E-Mod is already set in stone. The E-Mod was pegged many weeks ago. A reserve review is a waste of time at this point. Search for my posts on Unistat Date.
2. There are many options to a regular Workers Comp policy. Organizations of any size have many choices such as PEO's, self insurance, self insurance pools, small or large deductibles to name just a few. I have posted on this often.
3. The Workers Comp premium auditor will audit your policy from 1/15/11 to 3/1/11. Make sure that your records are in order, especially if your company uses sub-contractors.
4. Talk with your agent about extending your policy renewal date for one month or more. Agents drown from 12/15 to 12/31 of each year. Your company will get much better service by not having a 1/1 renewal date.
5. If your company is going to work in other states, make sure that your policies cover your employees when they work in each state. If an employee tries to file a claim in a different state than your home office and your company does not have coverage, things could get a little messy. I have seen insurance companies deny coverage for a company not having paid premiums in a certain state.

I will post 6 - 10 in my next post

The type of insurance in which payment of all losses up to the policy limits is provided without the use of deductibles. Because the insurer assumes more risk, the premiums will be higher. This form of insurance is also available for many types of policies other than workers compensation.

This is sometimes referred to as pie chart insurance (coinsurance). One of the parties that provides additional insurance to the same person or policy. A Coinsurer provides partial coverage along with other coinsurers. Coinsurers are generally used when the amount being covered is too large for a single insurer.

We often hear that Workers Comp premiums are just part of doing business. Would premiums then be the same as a tax? The final answer is no. I thought I would list a few of the similarities and differences.

The following are similarities between Workers Compensation premiums and payroll taxes - they are both:

• Based on wages
• Subject to audit
• Require excellent record keeping
• Controlled by an outside party (IRS/Insurer/Rating Bureau)
• Complex in nature
• Three-year window for questions or disputes

The following are differences between Workers Compensation premiums and payroll taxes:

• Almost all Workers Comp policies are audited, less than 2% of all taxes are audited
• You can shop and compare policy pricing, not taxes
• Payroll taxes have very few inputs to the calculations, Workers Comp premiums have many more variables
• Some of the variables that go into Workers Comp premiums and audits are more of an opinion than taxes (Class Codes, etc)

The bottom line is that Workers Comp premiums are not just part of doing business like taxes. If you feel something is wrong with your Workers Comp policies or audits, look them over very closely. Stop just writing checks is one of our old mottoes. The Workers Comp bill you receive is not just part of doing business. Check out how they figures were arrived at before paying the bill, especially in this economy.

The portion of a Workers Comp Policy Premium that has been paid beyond the current period. The Unearned part of the term means the insured has not yet used that part of the premium in their policy. If the insurer or insured decides to cancel the Workers Comp policy there will be a refund due depending upon the final audit less any short-rate penalties.

There are many complaints handled by the state Insurance Commissioners on how the Unearned Premiums have been calculated. There was a sharp increase in premium refund complaints post-Katrina when property insurers were wholesale cancelling policies of coastal insureds.

Also known as a Contractor and/or Owner Controlled Insurance Policy, a Wrap Up Policy is a single policy naming all participants in a project as insureds. The use of a Wrap Up Policy for workers compensation provides coverage without each individual worker or contractor purchasing it's own policy. The industry most likely to use this type of policy is construction.

An employers Risk I.D.# is assigned by it's rating organization. Each employer's Risk I.D. # is uniquely it's own. Through the use of this system, each employer's past Workers Compensation experience can be isolated and tracked.

AIG is still growing steadily in the Workers Comp arena. In the last post, I included a passage from a very recent publication by the US Treasury Department on the TARP program.

As I have posted very often, the core of AIG's business was never going to fail. The financial products area was failing, but AIG the insurer was doing well. The point that the Feds missed was that a bailout was never needed for the insurance services part of the business. I have friends that work for AIG that I verified this with before posting anything on the bailout.

The Federal Government would have done very well to split AIG into two parts. AIG later did this with the AIU unit. The balance sheet of the insurance business would have never required a bailout whatsoever. It was healthy and obtaining more business due to very precise and aggressive underwriting of certain markets. Even though they were huge, they did not just write policies to obtain the business.

Splitting the company into the two halves may have exposed the underbelly of a financial services area (not just AIG) that was very risky at best. However, in my opinion AIG Insurance Services would have had a good balance sheet. The Feds may have decided to mix the funds to not create a panic if AIG's financial services area had to be bailed out on a standalone basis.

However, as we all know some of the biggest names in corporations (Donald Trump, etc.) specialized in splitting businesses into components. The profitable ones are usually kept and the unprofitable or marginal components are sold off - which is akin to the taxpayers bailing out AIG.

I may be off-base with this post. If anyone would like a copy of the government publication, email me and I will send it to you. It is worth reading as it was our $$$.

The following is a passage from a document published by the UNITED STATES DEPARTMENT OF THE TREASURY - OFFICE OF FINANCIAL STABILITY Troubled Asset Relief Program:

Two Year Retrospective. This is better known as the TARP program. Yes, I did read this to see the Feds take on the crisis. Approximately 9 pages were dedicated to the AIG Bailout. I am going to include the passage and then comment on it in the next post.

Amidst these events, on Friday, September 12, American International Group (AIG) officials informed the Federal Reserve and Treasury that the company was facing potentially fatal liquidity problems. Although it was neither AIG’s regulator nor supervisor, the Federal Reserve Bank of New York (FRBNY) immediately brought together a team of people from the Federal Reserve, the New York State Insurance Department, and other experts to consider how to respond to AIG’s problems. Congress gave the Federal Reserve authority to provide liquidity to the financial system in times of severe stress, and it acted to fulfill that responsibility.

At the time, AIG was the largest provider of conventional insurance in the world, with approximately 75 million individual and corporate customers in over 130 countries. AIG’s assets exceeded $1 trillion. It was significantly larger than Lehman Brothers. It insured 180,000 businesses and other entities employing over 100 million people in the U.S. It was a large issuer of commercial paper and the second largest holder of U.S. municipal bonds. AIG’s parent holding company, which was largely unregulated, engaged in financial activities that strayed well beyond the business of life insurance and property and casualty insurance. Its financial products unit was a significant participant in some of the newest, riskiest, and most complex parts of the financial system.

In the chaotic environment of September 2008, the Federal Reserve and Treasury concluded that AIG’s failure could be catastrophic. Among other things, if AIG had failed, the crisis would have almost certainly spread to the entire insurance industry, and its failure would have directly affected the savings of millions of Americans in ways that Lehman’s failure did not. Therefore, the government took action to protect the financial system.

AIG needed a durable restructuring of both its balance sheet and its business operations. Falling asset prices generated substantial losses on the company’s balance sheet. They also increased the payments to counterparties that AIG was required to make under the terms of credit protection contracts it had sold. AIG’s insurance subsidiaries experienced significant cash outflows related to a securities lending program, as the value of residential mortgage‐backed securities that they had purchased and loaned against cash collateral continued to fall.

In general, the definition of Ballast is something, such as a weight, added to give stability. In Workers compensation, it is the factor of the experience rating formula that prevents the x-mod from shifting too high or too low. As expected losses increase the ballast value increases.

A Practice that attempts to ensure the risk position of a company or organization as it tries to satisfy it's goals. There are just a few steps to this practice but they are definitive. One is clearly defining the strategy and goals of a company and then forecasting any possible events that may keep the organization from achieving it's goals.

One of the most mystifying areas of Workers Comp is in the area of reserving. I have written often on reserves, as believe it or not, they are just as mystifying to the claims adjusters and supervisors. I can guarantee that if you set down ten adjusters/supervisors in a room, give them the facts on a Workers Compensation file, you will receive a spectrum of reserve levels. Why?

One thing to point out early in this post is that setting reserves on any Workers Comp file is an art unto itself. I have seen software packages that will set the reserves for adjusters - SOME OF THEM WITHOUT AN OVERRIDE FUNCTION. You can add the software package to the spectrum of reserve levels in the room of claims adjusters and supervisors.

One caveat is that the expectation of accurate reserves at the start of a Workers Compensation file is not valid. The reserves that are placed on a file in the first 60 days are just not that accurate as the file has not had the time to mature and develop. Please note that in our file reviews we often see the reserves left unchanged throughout the life of the file after the 60 day initial reserve.

The other side of the coin is that if a company keeps reminding the adjuster to check the reserves on a file, the adjuster may analyze the file for an increase. Knowing which files to review with an adjuster and at what is the best time to review the reserves is crucial. As I have posted many times, your file reserves feed directly into your Experience Modification Factor (E-Mod).

I will not leave the self insureds out on this one. For budgeting purposes, your self-insured program should have Loss Development Factors (LDF's) promulgated every year. If you do not, you are throwing away $$$. The reserves on your self insured Workers Comp files feed directly into the LDF just like the E-Mod. LDF's can make or break a Risk Manager's budgeting process.

Bottom Line - What is a Risk Manager or CFO or Company Owner or other person handling the Workers Comp to do about reserving? Check my post next time.

EOB is a new term in the Workers Compensation industry. Until recently, EOBs were common to the Health Insurance industry and are sent out to claimants so they are aware of the benefits that their insurance carrier is paying out on their behalf.

Recently, EOBs have been sent out to Workers' Compensation claimants by a handful of carriers, self-insureds, and TPA's.

Hard Market is the term used to designate the period after Soft Market. It usually occurs after a wide scale catastrophe which ends soft market. During Hard Market, standards for underwriting become more rigid, premiums rise as well as profits, and competition lessens.

Part of a cycle, the term soft market describes the time when premiums are low, profits dwindle, and competition increases. As the number of claims increase, insurance carriers can no longer afford to lower premiums to increase volume. When this happens, the soft market portion of the cycle comes to an end.

California has a great system for finding out if the contractor you are about to hire has Workers Compensation insurance. The website is https://www2.cslb.ca.gov/OnlineServices/CheckLicenseII/CheckLicense.aspx You can also find out whether or not your potential contractor has been suspended from the Contractors State License Board for some reason. I am sure there are other states that have something similar, but this one seems to be the model of how it should look and operate.

The existing statute was renewed very recently. With Governor Schwarzenegger vetoing so many Workers Comp bills, I wanted to include one that showed a successful program that will be renewed.

Yes, it is California only again. However, what happens in CA will happen in the rest of the country in the next few years.

(1) Existing law requires private employers to secure the payment of compensation by obtaining and maintaining workers’ compensation insurance or to self-insure as an individual employer or as one employer in a group of employers. The Contractors’ State License Law requires every

licensed contractor to have on file at all times with the Contractors’ State License Board a current and valid Certificate of Workers’ Compensation Insurance or Certification of Self-Insurance, or a statement certifying that he or she has no employees and is not required to obtain or maintain workers’ compensation insurance coverage. Existing law, until January 1, 2011, requires a contractor with a C-39 roofing classification to obtain and maintain

workers’ compensation insurance even if he or she has no employees. Failure to comply with this requirement results in the automatic suspension of the license. However, with respect to a license that was active on January 1, 2007, and included a C-39 roofing classification, existing law, until January 1, 2011, requires the registrar of contractors, in lieu of suspending the license,

to remove the C-39 roofing classification from the license if the contractor does not have workers’ compensation insurance coverage. This bill would extend the operation of those provisions until January 1, 2013, with respect to a license that is active on January 1, 2011, with a C-39 roofing classification. The bill would require the suspension of any license that, after January 1, 2011, is active and has had the C-39 roofing classification removed, if the licensee is found by the registrar of contractors to have employees and to lack a valid Certificate of Workers’ Compensation Insurance or Certification of Self-Insurance.

(2) Existing law requires an insurer who issues a workers’ compensation insurance policy to a roofing contractor holding a C-39 license from the Contractors’ State License Board to perform an annual payroll audit for the contractor. Existing law requires the Insurance Commissioner to direct the rating organization designated as his or her statistical agent to compile pertinent statistical data on those holding C-39 licenses on an annual basis and to provide a report to the commissioner each year. Existing law provides that these provisions are inoperative and repealed on January 1, 2011.

The Department of Labor's Employment Discrimination Bureau (EDB) is responsible for the enforcement of the Retaliatory Employment Discrimination Act, or REDA. Through this act, employees who are involved in a Workers Compensation Claim are shielded from any form of retaliation or discrimination by their employers. Complaints of retaliation or discrimination must be reported within 180 days.