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Safety culture controls insurance

While government agencies expect workers’-compensation rates to decrease in the coming year, companies are taking control of those rates through smart business strategies.

While government agencies expect workers’-compensation rates to decrease in the coming year, companies are taking control of those rates through smart business strategies.

That means creating a culture of safety around workplaces where there is an increased risk of injury, such as in mechanical shops and construction sites, executives said. It also means looking at insurance as a necessary expense that should be controlled when possible, they said.

Often, safety will help take care of cost, said Mark Reilly, chief operating officer and a partner with Fetrow Insurance Associates in Mechanicsburg, Cumberland County.

Focusing on safety with employees is the best thing companies can do, he said. It will reduce the number of severe injuries on the job. Safer employees will reduce the number and size of insurance claims, he said. A company’s record of injuries and claims is known as its claims experience.

“The insurance industry ebbs and flows. It goes through cycles. Claims experience has gotten better,” Reilly said.

Those companies with better claims experience are usually well-funded and well-managed, he said. Also, they have employees that tend to be more efficient, he said.

The state Department of Labor and Industry is pumping up safety after it, the state Department of Insurance and Gov. Ed Rendell announced that company losses due to illness and injury decreased.

Losses declined by an average of 10.2 percent, according to the Department of Insurance. That could affect new rates in the future. Rates for this year are affected by previous years.

Losses decreased three out of the four previous years, including 8.6 percent in 2006, 2.9 percent in 2005 and 2.4 percent in 2003, said Justin Fleming, a spokesman for the Department of Labor and Industry.

Workers’-compensation insurance payouts in Pennsylvania decreased by $88.5 million from 2005 to 2006, the last years for which statistics were available, Fleming said. Payouts decreased even though total workplace injuries and illnesses increased by 8 percent, he said. The injuries and illnesses could have been less severe. It’s a good trend for businesses, he said.

“Usually what happens, if there’s a decrease in payouts from the previous year from insurance companies, that’s followed by a reduction in rates,” he said.

Prices are also depressed because profit is up at insurance companies, Reilly said.

Central Pennsylvania is a good market for workers’-compensation insurance, he said. The area had few highly hazardous industries, but many quality workers.

“They’re genuinely interesting in getting back to work,” he said. “They’re not looking to take insurance money and not work.”

Walton & Company Inc., a mechanical shop and heating, ventilation and air-conditioning contractor based in York County, has seen some of the same with its workers, said Andy Volovar, its chief financial officer. Walton & Company works with doctors to bring employees back to work as soon as they’re capable, even if those people need to refrain from strenuous activity for some time. That could mean an employee from the machine shop spends some time answering phones, learning to organize project bids and other aspects of the business. It broadens the knowledge of that worker, making him an asset to the company, he said.

“It shows the guys from the shop that office work is not just sitting around drinking coffee,” Volovar said.

The company also has a policy of bringing an injured employee back at their original salary, he said.

There are other strategies to control the cost of workers’ compensation insurance, Reilly said.

If executives want the trend of lower insurance costs to continue, they can hire independent analysts to conduct additional safety training for employees and managers, he said.

American Westech Inc., based in Lower Paxton Township, Dauphin County, has a division that consults on industrial hygiene and safety consulting, said Frank Stossel, the company’s chief executive officer. It works with companies that have a lot of workplace injuries to find problems and fix them, he said. American Westech also has an environmental testing laboratory. In 2001, the company was responsible for developing safety protocol for the cleanup of anthrax at multiple federal facilities in and around Washington, D.C.

“We look at trends to find out where the majority of those injuries are happening. And then we give them suggestions for a safer work environment,” he said.

The use of an outside analyst can have a big impact on improving safety and reducing insurance costs by tens of thousands of dollars, he said. But for those savings to continue, companies have to stay on top of safety issues, he said.

Walton & Company uses an independent analyst, but it also makes safety a priority even above productivity, Volovar said. Employees know that if there’s a question about how a machine is operating, or other potential hazards, they should stop and call a manager over.

The company also offers incentives to employees, such as safety awards and bonuses. Periodic talks about common safety issues help too. Sometimes, simple things like reminding people to wear safety glasses can make a big difference, Volovar said.

Safety education is part of the full-time safety officer’s job, Volovar said. The company added the position more than six years ago. It’s been a full-time job for the past four years.

“You can’t make them work safe. You can’t beat them over the head to get them to work safe,” Volovar said. “You have to create a culture that promotes safety. It’s like turning around an aircraft carrier. It happens slow, but we’re coming around.”

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