A contractor’s safety performance is like a no-limits poker game, where those with good performance records can stack their chips in the corner and those with poor performance are eliminated from playing - aka, bidding for work. Just to stay in the game – and maintain a healthy crew - contractors must implement an effective risk management program.

The four elements of risk management

Every risk management program is designed to control the frequency and severity of losses. And for the majority of contractors, employee injures are the most frequent and expensive losses. They can lead to workers’ compensation (WC) insurance premiums far exceeding any other line of coverage. That’s because WC insurance is directly affected by a contractor’s previous experience, as indicated in the experience modification rate (EMR). Every employee injury has an immediate financial implication, as a deductible must be paid out. However, farther reaching and an even more significant effect of injury will be illustrated in the EMR for the next three years to come.

A contractor’s effective risk management program should include the following four elements:

  1. Support from upper management. Support for the risk management program must be felt from the top down and visibly demonstrated in such a way that employees should be able to cite examples of how the company supports their safety on the job.
  2. Employee involvement. When employees are involved in the creation of the company’s risk management program, they will be more likely to take ownership of the rules and meet expectations.
  3. Formal hazard identification processes at job sites. Make sure job site safety routines and processes are known to all employees. Job site management should understand these routines to be more important than their daily production schedules.
  4. Accountability system for control of hazards. Performance goals must be established and tracked, metrics must be developed and tracked down to the project and supervisor level and an initial orientation and continuously evolving system must be developed for employee safety training/education.

What if an employee does get injured?

Even contractors with the best risk management programs will inevitably experience an employee injury. For these situations, an effective injury management system will support and dictate the next steps. A combination of techniques should be considered when designing the injury management system, which will seek to control the EMR:

  • Ensure work hardening and return to work programs are in place and are fully utilized
  • Attempt to eliminate indemnification through alternative job placements
  • Meet with carrier and broker claims representatives to review and update loss reserves (schedule a meeting on a reoccurring basis, to be held before EMRs are prepared)
  • Push carriers and brokers to expedite claims closures in order toto reduce lingering claims from affecting future EMRs
  • Keep track of any subrogation recoveries and request changes when they are made
  • Focus the safety program on loss frequency, as it holds more value in the EMR calculation
  • Conduct EMR audits to ensure rate schedule, classifications and clerical errors are not at play
  • Mandate employee wellness initiatives to encourage weight loss and smoking cessation

While totally eliminating employee injury is impossible, it is possible to plan ahead and create processes that not only promote on the job safety, but also serve as a fail-safe for employees and business owners alike when an injury does arise. When this doesn’t happen, you’re truly gambling with employee safety.

Phil Casto is Senior Vice President for Risk Services at HUB International. Casto has extensive experience in the construction, manufacturing and petrochemical industries. He serves as a resource for the insurance brokerage operations, providing solutions in the areas of risk mitigation, safety, regulatory compliance, and workers compensation.