Riding the Insurance Wave

HOM employs its own drivers and also uses contract workers to drive the vans that deliver furniture. The company requires all of them to be trained to Minnesota Department of Transportation specifications for semi-truck operators, even though they don’t drive semis, says HOM’s human resources director Deb Smith. Drivers get additional training, as well, including special update sessions brought to the surface by individual accident investigations.

If a worker suffers a back injury or similar problem while lifting something, Johnston says, “We have them walk us through what happened: ‘Show us exactly what you were doing.’” Lessons are incorporated into training programs. As a matter of course, employees who lift heavy objects perform special stretching exercises twice a day. And a longstanding back-to-work program follows up with injured employees to ensure that they return to the job, if only on light duty, as soon as they are able.

Ergonomic issues get similar study and attention. Vendors once provided leather swatches (to show colors, textures, etc.) on 40-pound rings. “We had them redesigned,” Smith says. “We don’t want our salespeople tearing shoulder muscles when they pick up a 40-pound sample ring.”

Smith and Johnston say HOM’s overall premium costs have dropped for the past two years—this despite the fact that the company has opened additional outlets and therefore has significantly more property and employees to insure.

Competition among carriers in the current soft market played a role. HOM switched its workers’ compensation coverage to a different carrier two years ago, and its property and liability coverage last year. “We don’t jump around among insurance companies,” Johnston says, explaining that HOM stuck with its previous carrier for more than 10 years. But careful risk management has turned the furniture chain into such a plum account that a rival carrier made offers simply too good to refuse.

Even in a soft market, as Ademite notes, “it pays to position yourself as an ‘A’ risk.”

Not Just Rates

The benefits of a strong risk- management program are not limited to lower premium rates. Thomas points out that good machinists, for example, are not easily replaced. If one of yours is injured and unable to work, you’re not just racking up a workers’ comp claim, you’re losing production. And if your building burns down, your entire business can go up in smoke unless you have made contingency plans.

According to Johnson, studies show that the direct costs of a workers’ compensation claim average only about 30 percent of the overall expense. The rest comes in the form of indirect costs paid by the employer, not the insurance company, even if the deductible amount on the policy is zero. These indirect costs come in such forms as temporary labor, increased training, additional supervisory time, production delays, higher stress levels on the uninjured employees who must work shorthanded, and sometimes lost or unhappy customers.

Your insurance company’s enthusiasm for risk management obviously is self-serving; in a carrier’s perfect world, no premium-paying client would ever file a claim. But businesses that keep a careful eye on risk mainly wind up serving themselves.