Workers’ Compensation Insurance: Saving Money Through Safety

By | October 25, 2013

Blake NilssonBy Blake Nilsson, CIC

Account Executive with The Buckner Company



A Brief History of Workers’ Compensation

Utah State laws require employers to buy and maintain workers’ compensation coverage for all employees.  Before workers’ compensation laws were established, injured workers would have to file a lawsuit against their employer to prove negligence or unsafe working conditions if they felt entitled to compensation for their injury.  This was a difficult process for both the employer and the employee that often took years to reach a settlement.


As the American economy progressed further into an industrial-based workforce, it became increasingly necessary to find a more effective method to deal with injured workers.  State governments recognized that injured workers should not be expected to sue their employers for compensation, and also that employers needed a solution to protect their organizations from the skyrocketing costs of these types of lawsuits.  Employees faced lost wages and limited capacity to work, which caused problems for society as a whole.  Employers’ ongoing time and legal costs limited their ability to run their businesses.  Workers’ compensation laws were enacted to guarantee certain benefits to injured workers and their families, while at the same time giving employers protection against lawsuits and greater ability to manage injury-related costs.


Soon after workers’ compensation laws were enacted and private insurance companies started providing coverage to employers around the country, it became necessary to collect data and tailor the cost of coverage to each individual employer.  The National Council on Compensation Insurance (NCCI) was formed to gather and supply data to state governments and insurance companies.  Among other things, NCCI collects data from thousands of policies and claims and supplies this data to insurance companies so they can adequately predict their costs and set rates for each class of business.  NCCI also rates each company to generate their experience modification (E-MOD) factor.  A company’s E-MOD dictates the premium rate an insurance carrier will offer an individual business based on that company’s specific claims history and experience.  Insurance companies file their rates with each state where they provide coverage and for every worker classification they cover.   A company’s end premium rate is then modified from its industry standard, using the discounts provided by the insurance carrier, as well as the E-MOD rate.  The experience modification rate indicates how a company performed against its peers over the most recent four-year period.  The end result is that a business owner will either be paying more or less in premium dollars for coverage than his or her average industry peer.  Because the cost of coverage is modified this way, especially in the construction industry, it can truly affect a company’s ability to compete for work.



Commit to Safety and Control Costs!

The experience rating factor creates a large incentive for construction companies to implement a successful safety program.  Much the same as trying to develop a reputation for doing quality work to maintain a reputable reputation, business owners should strive to develop solid safety programs to qualify for the best insurance rates available.  Both of these endeavors should help to increase profitability and ability to compete on the most desirable projects.  While not all accidents can be avoided, there are many ways to reduce both the frequency and the severity of them.


In Utah, companies can secure workers’ compensation coverage through a variety of insurance companies that are filed to write business.  Independent insurance agents have the ability to “shop” and compare coverage options and rates from several insurance companies.  Insurance rating and pricing goes through an extensive underwriting process, and underwriters must justify the discounts that they apply.  The underwriter will review a company’s records, as well as current levels of commitment to improving safety practices when determining these discounts.  Generally, the more committed a company is to an established safety program, the less they will pay for workers’ compensation coverage.



ABC Member Discounts:

Workers Compensation Fund (WCF) has shown a great commitment to the construction industry and has agreed to provide a five percent discount to current ABC members!  To maintain this discount, WCF asks that members attend two safety seminars each year.   For more information, contact Blake Nilsson.



Other Ways to Reduce Workers’ Comp Costs:

  1. Companies should regularly inspect and improve upon their current safety program to demonstrate their level of commitment to keeping workers safe.
  2. Participate in the STEP program that is set up through the ABC.  This program was created by contractors specifically for the construction industry and is a great place to start or further a current safety program.  Participation will help to better experience with claims and will create a more desirable risk to prospective insurers.
  3. Participate in specific safety plans and apply for safety awards, which can help bolster reputation as a safe company
  4. Companies should share safety efforts with their insurance agents, who can in turn and make a solid argument to insurance carriers that their clients deserve the best rates


Employers owe it to their employees to do everything in their power to make sure they go home safely after work each day.  In addition to premium savings and peace of mind, safe companies may find that they are able to hire and retain better employees because of an overall safe reputation.


For More Information or to Compare Rates Now:

Please call Blake Nilsson at 801.866.0866 or with any insurance-related questions or for more information regarding safety programs and discounts that are available through the ABC.  Have a safe and productive 2014!



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