Good afternoon. Welcome to PCI's webinar series. Today's webinar is Risk Insurance and Safety Management, How Your Safety Program Influences How Much You Pay. This webinar is in partnership with Amerisave Consulting and Safety Services. My name is Nicole Clow, Marketing Coordinator at PCI, and I will be your moderator for this session. Before I turn the controls over to your presenters for today, I have a few introductory items to note. All attending lines are muted. The GoToWebinar Toolbox has an area for you to raise your hand. If you raise your hand, you will receive a private chat message from me. If you have a question, please type it into the questions pane, and I will be keeping track of your questions and will read them to the presenters during the Q&A period. Also, a pop-up survey will appear after the webinar ends. The handout for this webinar can be found in the Handouts section of your webinar pane. If you cannot download the handout, please email PCI Marketing at marketing at pci.org. Today's presentation will be recorded and uploaded to the PCI eLearning Center. PCI is a registered provider of AIA CEFs, but today's presentation does not contain content that has been endorsed by AIA. Today's presentation is non-CEU. Our presenter for today is Steve Yates. As Senior Director of Business Development at Amerisave Group, Steve leads a full team of safety professionals and support staff working to secure the safety and health of hundreds of thousands of workers across North America. As a certified leadership coach, Steve is passionate about developing leaders within his clients' organizations who will value and empower others to realize Amerisave's vision, workers everywhere valued and safe. I will now hand the controls over so we can begin our presentation. Nicole, thank you so much. I appreciate the introduction and for getting us started and also for allowing us to present to the membership at PCI once again. Some of you that are familiar with either myself or Optimum Safety Management are noticing a little bit of a change in our branding or company name today. We're pleased to announce that August 1st, we have joined forces with the Amerisave Group. It's a great organization. It's been in business for many years, doing many great things across our country, and we're excited to join the larger team at Amerisave and help to continue to promote this vision of workers everywhere valued and safe. So same great team from Optimum, transitioning over, enhanced service model, more information on that coming, that kind of thing. But we just wanted to take this opportunity to introduce the new company name and brand. So thank you for the opportunity to do so. Nicole, I have joining me today on the webinar, Scott Razor. We are excited to have Scott on our team. Scott is the former president of Zurich Construction, or pardon me, former president of construction for Zurich North American Insurance. Scott and I have known each other and worked together for probably the last about 19 years now. He's got a storied career, started out in his undergrad degree in occupational safety and health, culminated with a master's in business administration. As he joined, Zurich was in the claims department, moved up through underwriting, and eventually leading the entire team of underwriters watching over Zurich's construction group. So there's probably not many companies, Scott, I would imagine, that are in the construction arena in the middle market size that you haven't at some point either written their insurance, looked at their insurance, denied their insurance, had some sort of an impact over their organization related to the insurability. And we are excited to have you talk about this topic today that is very common to you and yet fairly elusive to some of the folks that are on the line. So we're thankful to have you with us. And I want to welcome you into the webinar. Okay, thanks, Steve. I'm excited to be here today. Appreciate the opportunity to talk about this topic. We're going to start with risk management. The reason we're starting there is it's important to understand how thoughtful a firm is, how they deal with their risk. And in risk management, there are five caveats, five techniques that basically deal with the entire bucket of risk that an enterprise looks at every day as it does its business. I'm going to talk about each of these individually. Probably not going to be exhaustive, but it's important to start. Every subject has a start and an end. And when you think about moving through insurance and safety and risk, every firm should start with the risk management platform and dealing with techniques that address the risks that they face. So I'm going to go through each of these. Next slide. Avoidance. So avoidance is a technique, not much of a technique. It just means you just stop doing something. You discontinue a product or service. It's just too hazardous. It's not your core skill set. It's something that's better done by someone else. A lot of firms, especially over the past 30 years, think a lot about integrating backwards into other component parts of their business and find they just don't have the skills set to be profitable there. But profitability is measured on a lot of different angles, and one of them is safety and loss. And so avoidance is probably the easiest technique to understand. And it's something that the firm should know about. It should be carried and storied through the firm's history in case someone wants to go back into that business so they can discuss why they left in the first place. The second one is retention. And retention can be easy or complex, but retention is the risk of loss is small enough that you can handle it in the normal cost of business. So small tools, you know, ensuring small tools sometimes is just not worth the cost of insuring them. Moreover, lots of firms take deductibles on their tools, small component parts, small transactional stuff you can pick up at Home Depot if you need it. It's just easier to retain that loss and manage it. But then there's also larger deductibles. So you see this a lot in the workers' comp arena where firms are looking to control some of their costs and are confident in their safety program that they won't have that many losses, that they'll take a large deductible on their workers' comp. It's easy to think of this in terms of your auto. A $100 deductible on your auto will cost you a lot of insurance premium, but you might feel that you can actually retain $500 to $1,000 a loss. Well, in workers' comp, it ranges from $10,000, $20,000, hundreds of thousands of dollars in large deductibles, depending on the appetite for risk and how much leadership has in the confidence of being able to manage it. So the other part of that, of course, is if you're going to take a large deductible, you have to understand how to escrow for the inevitable, which is probably some loss. So it isn't a new thing on the balance sheet. The balance sheet is ready to absorb that loss. Next one is spreading or risk sharing, and that's a typical technique that you see where manufacturers have a few different locations, not only for transportations of goods or services or labor market, but also if something happens, like a catastrophic fire or earthquake, tornado, the firm is not down. The other part that people may come to realize quite a bit in this day and age is a lot of firms store duplicate copies of their data off-site in the event of something happening. The data can be uploaded again. Next slide. The next one is prevention or reduction, and this is a technique that is aimed at reducing the severity or eliminating the possibility of loss. You see things like that, or firms like that. Firms will do job hazard analysis. You'll see a lot of discussion around material management, and that can be everything from preventing injury to the material itself, stacking storage, keeping it safe from flood, all the way to handling material. How do you handle material so that workers don't get hurt? So loss prevention and reduction is a risk management technique. And then we're going to talk a lot about this today is transferring the risk, which the easy example, of course, is insurance, is to pool the risk with an insurance company, pay an insurance premium, and they have the loss. But the interesting part about risk transfer that it can be a whole other subject matter unto itself is you think about risk transfer in terms of contracts or vendor agreements or having another firm perform the work or manufacture the product and then warranty, guarantee, or indemnify you for the quality or performance of that product. So transferring a risk and insurance is what usually thought of as the main category of risk transfer for most commercial enterprises now. So I'm going to pivot on the next slide to insurance costs, which is it was in our title today. So we're going to talk about the next slide is going to be around insurance costs. Whoops, I got my slides mixed up. Sorry about that. So I just real quickly is it. I think everybody's fairly aware of the types of insurance workers comp is we're going to spend a lot of our time general liability for people that enter your premises or product that you manufacture in terms of its performance and whether it's effective or not. It also covers libel and slander to a certain degree. So the general liability policy is important. I think everyone understands auto liability and physical damage. I alluded to fixed property and equipment when we were talking about risk management and techniques to manage risk and one that's often overlooked, which is professional liability. Professional liability comes in a lot of different forms. It can be directors and officers, professional liability, or it could be professional liability pursuant to a skill set that's exercised either directly or indirectly, which is, I think, where people make the mistake. Sometimes is we're not an engineering business, but we have engineers and their license and they've rendered an opinion that can create a professional liability. There's also a lawyer's professional liability as well and doctors and things like that. So fairly common insurance. So now I'll give it to the next slide and talk about insurance. So insurance is, everyone understands you pay an insurance company a premium. You may take a deductible. Insurance costs are somewhat negotiable and they're usually placed through an agent who represents the insured or the business. And as people often find in the current environment, costs can be highly variable. And if underwriting is correctly done, the costs are variable based on the characteristics of the risks and also takes into account accelerated or inflationary costs that's buried within the insurance premium known as the loss cost portion of the premium, which is increase in verdicts, awards, or values of things that have to be replaced or no longer can be replaced. Near the price that they were prior to being damaged. The characteristics of loss will result in premiums being variable. So we're going to talk about characteristics of loss. We talk about techniques of risk management, but now this is the things that arrive on the underwriter's desk and the underwriter determines what the quote for the insurance premium are built to you. So these characteristics are the individual risk factors that your company presents in terms of what the probability of loss is going to be. These are controllable. These are within your hands. They are the kind of the profile of your business that an underwriter looks at as they take into account how to pick the price point for your insurance premium. I mentioned loss costs a little bit there for just a point that loss costs do get passed through. You may see insurance premiums go up a certain percent and I'll talk about percentage premium increases this year, but loss costs are often thought of the inflationary factor of insurance. But honestly, the variable costs that result from the characteristics of loss is where the insurance premium can be variable or hopefully negotiated for a good cost. Go to the next slide. So why is this important? Well, insurance costs most enterprises anywhere from 3% to 8% of their annual revenue. And that's variable, I understand, but different industries have different risks. So you may see that you may be in an 8% industry, but it's a fairly significant budgeted annual cost. And the rates fluctuate usually most within industry loss experience. So if the cost of injuries or verdicts goes up, the cost of verdicts usually goes up higher in some industry groups. You might think about that as like target defendants that plaintiffs sue and so on and so forth. Average base rates are developed and filed in workers' comp. And those average base rates are discounted by the underwriter based on your experience, what your loss record looks like. Or unfortunately, they're gavoted for poor experience and controls. Or I should say sometimes just lack of understanding there aren't any controls. Underwriter has to hedge his bet. So they don't understand that there's controls or a sound risk management base for which the controls are driven from. It's hard to want a discount or a premium for this. So one of the things I should mention is that 3 to 8%, you should understand that about 40% of your insurance costs are in workers' compensation. That's an average over a lot of different industries, but if you're thinking about, well, I need to understand my costs. I want to get a good costing of my insurance program. Sure, you can spend a lot of time on your general liability or your auto premium, but honestly, what's going to drive the big difference is going to be workers' compensation. So go to the next slide and take a look at what rates are doing this year. I was the construction guy, as Steve mentioned in the intro, so I'm always interested in seeing what the construction market's doing. But you'll see that there isn't a single line of business that doesn't have a projected rate increase, which is interesting. You might say, well, inflation is pretty prominent these days. Inflation in terms of loss costs, in fact, your insurance premium, general inflation really doesn't affect it that much. It's the anticipation of loss that affects it. So you'll see that each one of these lines of business, like all of them, are going up in cost. And when you think about that number that I mentioned a slide or two ago around what your costs are for insurance as a percentage of your revenue, this is starting to get pretty costly. So understanding your risk management strategy and having controls to prevent loss will make you presentable and offer you an opportunity to negotiate that insurance premium to something that's reasonable, or perhaps even downward, which can be reinvested in loss control or awarded as bonuses. Go to the next slide. So one of the drivers of that cost is the experience modification rate. And that's what the base rate is taken times to determine how much you should pay. And this was developed by the National Council on Insurance to give firms who invest and promote safety and worker safety in particular, some sort of credit for keeping their losses under control. And then some sort of penalty when you're not the firm that keeps the loss under control. There are a couple of really important items here. You'll understand and we'll talk about a little bit on the next slide, but it's calculated over a three-year window. So when you have a loss, you say, wow, I'm glad that year's over because our experience mod is gonna take a hit. But if we're lost three this year, we're gonna be okay next year. Well, that's not exactly true because it's calculated over a three-year period of time with a one-year lag. The significance of 1.0. So 1.0 is the industry average for the class code of work that's being rated. So you may have office workers during a different class code than would be someone who's driving a forklift or doing labor or assembly. So each class code has a different rate basis, but overall it's aggregated. And a 1.0 means the sum of your base rates in your different classes is industry average. So that's to understand. If you have somebody who has a 0.8 mod, they're 20% better than industry average. On the other side of it, somebody with a 1.2 mod is worse than industry average. And we'll talk in the next graph a little bit about how long this lasts. But Steve, we were talking the other day about a customer you were working with that had a significant issue around their experience modification and wanted to talk about how to change that. Would you care to maybe give us a little background on that? Yeah, absolutely, Scott. Yeah, thanks. And I really appreciate the way you're going through this. I've been doing this for now about 20, gosh, 24 years, something like that. And early on, I learned about the EMR and the impact to the business. And I've been a business owner my whole career. I've always been in and out of different businesses and really like to figure out what it is that I can do to make the business more effective and all that kind of thing. So when I learned about the mod, well, this is where it all ends, right? It's like, yeah, we can help people be safer at work. We can help people not get hurt. We can improve the OSHA recordable rates. We can improve then the work comp performance. But this modifier is really what translates into bottom line dollars on the P&L for the business. And if I can help business owners understand this and I can help put systems in place that return a better EMR, it's putting profits right on the bottom line of the company. And therefore it's paying for their investment in safety. This is a big way that companies get that back, but it's rewarding. I mean, as somebody who thrives on watching businesses perform well, it's a big driver for me. So I often get these calls from companies that say, hey, I'm struggling with my insurance performance. And I got a call from a guy last week, about a week and a half ago, and his EMR, Scott, believe it or not, is a 1.74. And, you know, I mean, you've just explained what that means but just to make sure everybody caught that, they're paying just in, you know, if all things being equal, they're paying 74% surplus on their premium to the carrier just to get insurance. And I can tell you the name of the carrier that he threw out there that they're with, I've never heard of before. So you know what that surplus market's like. There's some odd, you know, loan shark kind of insurance carriers out there that are working in that market. But I've had employers where we've dealt with, we dealt with a large employer out in New Jersey a few years ago that was in a lot of trouble with OSHA. And then as I sat talking with their controller, a CFO, pardon me, this employer had 1200 employees. He had never heard of their EMR, which I just thought was shocking, you know, for a guy whose responsibility was to purchase his insurance, that he had no idea what the EMR is, and really shame on his broker for not educating him and making him an educated buyer. But, you know, we've often seen that. So I just, for those that are, you know, members of PCI, we care about and value the industry. We, you know, we really wanna see everybody do well. You know, make sure that your broker, that you're working tightly with that broker and that they're educating you on not only what the EMR is, which direction you're trending, and how you can get it to come down if it's up. And one of the things I wanted to just kind of talk about, Scott, was, you know, the guy that I talked to at 1.74, he's in a world of hurt, obviously. You know, is he gonna be in business next year? Those are the kind of questions that he's asking. And he's a third-generation family-owned business. He's the, you know, son of the, you know, third generation that's running it. He doesn't wanna be the one that takes the business down, so he's trying to figure it out. But when we get him down to a one through a couple of three years of good performance, and he knows that he knows what he's doing so he can keep it there, what's the next steps? Like, one's not the end of the story, right? Right. Like, talk to us a little bit, Scott, about what goes on below one. Like, how much further below one can we get? There is a minimum premium that can be adjusted by taking larger deductibles. I mean, you can't take your experience mod down to zero. But, you know, I work with a general contractor who had experience mod of 0.33, taking $5 million deductibles. Well, that's how you get down that far. But I think the important part is, you know, your experience mod can create a competitive advantage when you're trying to procure a new business or you're entering into contracts to supply. A lot of contracts now insist that they work with companies that have an EMR below 1.0. And in fact, a lot of contracts, especially larger contractors that I've worked with, have a scoring system for the bid package. So they will have a scoring system that actually awards points the more you're deviated negatively to 1.0. So you may end up not getting a job even though you were the low bid because your experience mod was too high. And that's a competitive disadvantage. But I think the important part is talking about it in terms of a competitive advantage. So that's where we want to go with that. Do we want to go to the next slide and just give a little bit of a visual on the experience mod calculation? Yeah, absolutely. I'd love to just make a quick point if you don't mind as you're getting into this. The bottom example, that 0.67, is a real relevant example for this industry. I was just thinking about it as I was looking at that slide coming up. My first job in safety, if you will, when I first began to take my engineering background and use it then for safety to help people not get hurt at work and help a business keep its profits, you've heard me talk about that before, was in this industry. It was actually at a precast plant in Illinois. And we were not doing well. And our EMR was higher. And after a few years of really paying attention to it and working with the carrier and the broker and our team, I was able to actually drive that EMR down to this 0.67 number. And I can tell you, when we first started on that journey, the business owner would come up to me several times a week and go, what are you doing? You're disrupting production. These things you want to do, these trainings and all that, it's like, wow, there's all of this stuff that you're trying to help us change. And then three years later, he walked into my office and he says, thank you. Because we just saved a bucket of money on our work comp. So it does pay off in that 0.67 lot. I'll tell you, it's a nice thing when you've got it. But yeah, go for it, Scott. Well, I'm not going to spend a lot of time in the math. I think this is fairly obvious on this slide. But if you think about hundreds of thousands of dollars you spend insurance premium, and you look at the bottom of this slide, you're looking at $140,000. And these are direct costs. These are what you're going to pay. Discount and premium just because your experience mod went down. Now, that doesn't totally encompass the insurance premium calculations. As I said, they can be variable based on the risk characteristics. So this is how the underwriter develops the base premium or the standard premium for your account. So then they want to understand, well, how did you go from a 1.49 to a 0.67? Was it just dumb luck? Did you lay a bunch of workers off? How did that happen? So the underwriter is a bit of an investigator trying to determine if there's additional credit or debit that needs to be put on this account. So we'll go to the next slide and talk about the most important risk factor that underwriters assess. And as an underwriter, one of the first things me and my team did is we'd go to a firm's website. If we weren't three clicks away from finding a comment around management's commitment to safety and sending workers home safe, we were getting very nervous about quoting our account. And that's kind of an easy check when you think in terms of, is this firm committed? Is there a cause and effect between management's commitment to safety and the outcomes that we're seeing in terms of loss? So we'll go to the next slide. It's the first thing an underwriter answers in their underwriter narrative. What is management's commitment to safety? So I'm gonna talk a little bit about how underwriters measure that, give you a flavor of how they think about it. So we'll go to the next one. So they wanna know that management actively participates in the safety culture. Employee engagement, do your employees care? Are they checked out? Are your solutions sustainable? And does management invest time and money? So usually when an underwriter gets a submission or information about a business, it might be the safety manual, it might be the toolbox talks, it might be the stated commitment on the website. An underwriter assembles all this information and data to understand the risk before they put forward a price or a quote for business. And an interesting note, many companies are now using AI, artificial intelligence, to scan your materials, your verbiage, to give the underwriter a heads up on whether the computer's seeing the right words to understand that commitment. And all this stuff should be on your website and maybe not the safety manual, but I mean, it should be clearly understandable that management is committed and that way we understand whether it's scalable and effective and whether it's sustainable. Let's go to the next one. Those are the indicators. And what else do underwriters look at? So they wanna see documented safety training and education. We were working with a firm earlier this year that had an OSHA issue and most of the safety training and education was done up front, the first couple of days of work. It got a little sketchy after that, whether there was an annual training, whether there was computer-based training, whether there was documentation of ongoing education around this. Interestingly enough, one of the issues they had was when they brought on temporary workers and that was where they ran into a big problem with OSHA. Because just because you hire a temporary worker doesn't mean they don't need to be trained on safety and have safety education. And if they're on for some sustainable period of time, re-education. Whether the firm has a robust incident tracking and reporting system, sometimes it's good to go back and underwriters do this. They'll say, I was looking at a couple of losses. I wanna understand better what management did about this. What did the firm actually invest in to prevent this from happening in the future? Material management and staging. I mentioned that previously in the presentation. Material management's huge. It just is. Both on the property, workers' comp, and general liability. Managing materials, everything from stuff falling off of racks and injuring employees, to having the right personal protection equipment, whether it's steel-toed shoes, gloves, protecting from dermatitis for handling certain materials, so on and so forth. So an underwriter wants to know that. You don't have to tell the underwriter this, but they're gonna ask for it, and when you don't have it or they don't understand this, it's a problem when they go to trying to give you some credit to win the business, because they're trying to sell a product, an insurance policy. And then whether there's safety surveys or audits. So understanding whether there's a continuous understanding of whether things are being accepted into the culture or not, and just trying to make sure that the firm has a sustainable control of their risk. So we'll go to the next one. Hey, Scott, I just wanna talk about one quick thing on what you brought up here. I remember doing pre-quote account analysis for Zurich when you were there with the rest of the risk engineering team, and I remember a contractor I went out to see that took three hours in the office to explain to me with big binders in front of me and a room full of people, all the questions being answered by the one guy, the CEO, how great they were and all the different controls they had in place. And after three hours of just ear blinding kind of a noise, ended up out in the field to verify it all. And wouldn't you know that nothing that they were doing in the field matched anything I heard in the office. So as you're talking about this, I'm just mindful of anyone that's listening, make sure that what we're telling the underwriters that they can actually go and verify with evidence. It's not just a matter of having the tracking tools and all that, but that they're actually fully fleshed out and implemented. So when Scott says sustainable, it's like effective as well, right? So hopefully that's helpful. Right, and we actually help a lot of firms with taking a look at whether that is doing cultural surveys and understanding whether that culture is sustainably built throughout the organization and whether that feedback is two ways. So in terms of takeaways to influence your insurance costs, is you have to start with building a culture of safety. If you have a good culture of safety, congratulations, good job, but you have to make it sustainable. You can't just build it once and then say, oh, there it is, we're done. Make sure there's two-way communication and that the feedback's supported. I know there's always employees that have a problem with everything. We get it, but it may be that little gem in the rough about a way, a tool or a machine or some material stack that you go, wait a minute, as his supervisor, I need to give someone in management a heads up. That needs to be thought about. And then you need to develop and implement training for your supervisors and workers. You can't just train the workers. You tell the workers that we're committed to safety, we want you to give us two-way feedback and you don't have the supervisors trained to understand how to accept that, how to use that information and put it to practice so it affects your losses and it'll ultimately save you money in your insurance program. And you really need to think of safety as a profit center because it is, it really is. It's going to save you costs, so we'll talk about that. We'll keep talking about that because that always seems to be something some everyone's interested in. Am I trying to save money if I employ these things? The answer is yes. So let's go to the next slide. So I put the sites at the bottom of this and you can look this stuff up yourself if you want to take a look at the the entire report or the entire article which if you're in the business of justifying the investment might not be a bad idea. But you know if you control your risk, if you own and manage your risk, you will keep your employees safe and that will result in cost savings. So these are basic facts stated in these reports that establish safety programs reduce injury costs by 40%. Well but my insurance company pays that. Well we talked about experience modification. Guess what? Your insurance company is going to make you pay for that. So so if you can reduce injury by 40% that will train translate in the cost savings. Every dollar invested in savings programs gets a four to six dollar return and reduce costs. Well reduce costs. Reduce insurance premiums Scott? No. Reduce costs. Why? Because people aren't off of work. They're at their job performing their job. Nobody's messing around with OSHA doing interviews and tours. No one's hiring lawyers to come in and take a look at whether we need a program to get some sort of reasonable rectification of this OSHA violation. It's a magnification of cost. And then you know many companies are saving more than three dollars for every every dollar they put in the workplace safety. And it's you know sometimes it's easy to understand that you know insurance is one of death taxes and insurance. The only things they're absolutely certain in life. But if you take care of yourself maybe death isn't so oncoming. Taxes if you account for your expenses and plan correctly aren't so bad. And insurance can be reasonably managed providing you understand what goes into the calculation of premium and does your underwriter understand how committed, how good, and how much you want to reduce loss and send workers home safe. So we'll go we'll start to wrap this up now. This is kind of a funny that we had around the office around thinking about saving money by investing in safety. Thinking about you know trying to understand your techniques of risk and how it reflects upon whether loss occurs. And I'm not going to read all of these but I think you'll get the point which is it's a lot of work to figure this out. And it's a lot of work when you've seen it or you've seen it for a first time in your operation or network with people that see it all the time. So you know you need some help. Give us a call. You can call or email the safety helpline or you know if you just want to kick it around an idea or you want a clarification what we talked about the bit today. Just pick up the phone and we can give you some direction. That's great. Great Scott. Thanks so much for for helping us understand some of the topics a bit deeper. We do have a couple of questions that have come in but I do want to remind everybody that you know if you have questions if Scott has said something that's triggered a thought no question is crazy except the one that goes unasked right. So you know go ahead and drop those into the questions box. We'd love to love to take your live questions as we go. Before I get to the few of them that we have I do want to remind all the members you do have access to our toolbox talk programs at your members only section. So you can log into the member area of the PCI website. Click on safety resources and then just fill out the form and you'll get a response back pretty quickly to get you an account set up for free access to those resources. Excited to bring those to the members. We know they've been a value and want to continue to be able to do that for you. Again the Q&A section is open so go ahead and drop your questions in and Scott I'm going to start with the first one that came in. Question came in it says how much flexibility does an underwriter have to affect the policy price? Thanks that's a great question. Quite a bit. Generally speaking insurance companies monitor how much their underwriters are crediting or debiting accounts looking for a balance looking to understand that they can assess and price risk correctly. But I'd say after experience modification application you can see a deviation of as much as 40%. An underwriter can stack company authorized credits and and also authorized by NCCI that could amount is up to as much as 40% savings. And then after that you're starting to eat into expenses and things like that. But if you're paying hundreds and in a lot of cases millions of dollars for insurance those savings are going to stack up quickly and then think about what you can do with them. Reinvest in your safety program, bonus people for performance, all good stuff. Excellent, excellent. Hey Scott we've got a another question that just came in and it's kind of a multi-part question. So I'm gonna I'm gonna give this to you in pieces partly because I can't see the whole question all at once. Give me just a second and the way this Q&A sections working is give me, oh there we go now I can see the whole question. All right so the question is I'll get I'll read this whole thing out for you and then you can you can take whichever part you'd like first and I'll help you work through the whole thing. What are the biggest statistical drivers of the EMR? Is it in work comp payments or recordable and lost time rates? Is there a rough rule of thumb that OSHA recordable rate equals what in an EMR? Okay so the EMR is a direct calculation of what the expected losses are versus your experience. So it's the losses. Let's see when you say the losses just to make sure that we're clear. So the losses is what the total value of the claims is that's paid out in a given policy year but also how many claims right? So there is less that so it's usually not the numerical score that drives the EMR. It's the the base rate as developed in the industry and approved by NCCI is an expected losses number. So it's a dollar amount of claims. Got it. And then what did you do versus the dollar amount of claims? OSHA recordables and and and and TIRs and everything else are all noted in the underwriters underwriting materials to understand their their relevance but the dollars and cents part is what kind of losses did you generate versus how much in loss was expected and that's broken down by class code so it's not the same expected loss for somebody who's operating heavy machinery as it is an office worker. Right. Although it occasionally you do see a lot of office working injuries which raises an eyebrow. Sure. But it's it's going to be driven off the losses. Yeah it's really good. So so just to kind of take the OSHA recordable rate question. I mean I know in my experience of looking at OSHA recordable rates to EMRs the way I've always been able to kind of look at this and we evaluate a lot of companies obviously their OSHA recordable rates and their EMR data I've got in fact that one with the 1.74 I have all that data on my computer right now I'm doing some analysis of it today even and what what we look at is the TRIR tells us the frequency. Right. So we're always concerned with looking at frequency but also severity. So you think about your OSHA recordable rates or your frequency your TRIR tells you how many total pardon me that's not a good word how many total recordable incidents you have in a given year based on your man hours the hours worked and so on. When you start to look at your lost time incident rates or even your DART days away restricted and transferred those start to be indicators of severity. So I can tell you from experience that there are companies that have high TRIRs that have low EMRs and the way that that happens is that they have a lot of very small minor injuries that don't have a lot of claim value to drive up the insurance costs but that's that company is also going to have a low DART and a low LTIR lost time incident rate. As soon as a company starts to have DART and lost time incident rates that approach like a lost time rate that's approaching 2.0 now all of a sudden you're you're starting to really drive your EMR because you have a higher degree of incidence for the payroll and I think that might be more in line with the question that's being asked is there a rule of thumb it's not necessarily the OSHA recordable rate it's the lost time incident rate which is more the severity rate. Scott do you have anything to add to that or? Yeah first day of underwriter training. Yeah. Frequency is a precursor to severity. Yes absolutely absolutely yep yeah so that that light I tell you where I've seen that is in like light manufacturing where you know there's a lot of sewing machine injuries right so it's a pillow factory and you know it's it's people putting the needle through their finger that kind of thing you know the lighter injuries but yes in the manufacturing arena and especially in this one in the precast industry severity pardon me frequency is a precursor to severity for sure yep absolutely okay good thanks for that let me let me go to another question here questioner asks if the most important risk factor is a business's commitment to safety what are others that the underwriters will look at? Oh there's a number of them but just briefly we take a look at the finances to understand whether it's a going concern okay and do they have the ability to invest in safety or they're just staying alive we look at of course I mentioned material management and staging materials and and worker safety around material management and and and you know there's a checklist that we run through of stuff everything falls off real fast after that yeah so if you think about it you're an underwriter you need to put out ten quotes this week and I'm going through a lot of data and a lot of material and understanding the risk I don't get through the most important one or two somebody else is gonna be quoting this I'll decline it and you know one of the things you never want to get in a situation with is if you're with an insurance carrier and they start asking for more and so you're already with the carrier and they're asking for more information and they're they're really trying to up their game on their due diligence and they don't feel that they're getting enough from you to renew your policy the agent is obligated to tell all future underwriters that you have been non-renewed well so relationships with your insurance carrier are important so if you have enough claim frequency to do claim reviews you really need to participate in that understand what's driving those losses what gets underneath it how do we close those big claims quickly because no claim gets cheaper with time and and an active you know participation in that process so to your comment earlier Steve about management understanding EMRs well they not only should understand EMRs they should understand lost lost time or lost days away from work because that's gonna affect their operation in total and they should have an understanding what is being done to get that worker back on the job or get the claim set because every time claims have a tendency the longer they dragged on they get more expensive yep and then it continues to punish you on your EMR we talked about that three-year horizon yeah and getting claims closed we've been working with customers trying to help them get claims closed because a closed claim is not subject to further loss development right hey Scott we're coming down to just the wire here we've got one last question that came in that I I love this question and I really want to kind of explore this with you for our last couple of minutes what is a typical acceptable loss ratio so in workers compensation a typical average loss ratio is between 60 and 65 percent 60 and 65 percent so it's basically the losses divided by the premium it's gonna give us that loss ratio yes now I say that by being a guy who ran an underwriting company when I had underwriters underwriting offices underwriting groups start to eclipse 60 to 65 percent in terms of loss ratio I had an opportunity for improving underwriting yes so you know you can bounce on a 60% loss ratio and an underwriter still might not like it right but a company can't survive with greater than a 65% loss ratio on workers now makes sense so so here's what here's why I really love this question because again as a business guy I like being in the driver's seat when I'm negotiating I don't I don't like being in a position of weakness at the negotiating table and you know there's a lot of people on the line I'm recognizing some of the names I mean there's some people that are running the businesses that they're working for and they're likely the ones negotiating the insurance programs for their companies that being the case I want to help put them in the driver's seat so if if they're able to look at their losses and they're able to do that quick math that quick formula loss is divided by premium and they come up with that percentage ratio and that ratio is 35% or 40% correct me if I'm wrong but what that tells me as a negotiator on behalf of my company or in this case my client I've got some negotiating room because that underwriters got some room to give when it comes to losses I'm outperforming kind of what the average is so why wouldn't I be eligible for some credits mr. underwriter would that be a question who I'd be within my rights to ask sitting at the table sure I think it's a good question to ask to at least understand what credit they may be giving you already right right so if the underwriters retort on that is I gave you a 35% credit already yeah well how much room do you have yes and that's what I'd like to understand and then you know understanding your EMR it went up three years in a row and he's still giving you credit and you're asking for more you might run out of rope yes yeah exactly and and either of those right you know knowledge is not necessarily power applied knowledge is power right so now that we know and we can apply that knowledge now we were in a more powerful situation at the negotiating table but we're we're right at the top of the hour so we've run ourselves right out of time but I've enjoyed the conversation and I know that if if the members that are on the line didn't feel like I'd value out of this conversation I think they may have tuned it out because boy that literally the hundreds of thousands of dollars of advice that you just dispensed there is really worthwhile so Scott I want to thank you on behalf of Amerisafe and also on behalf of PCI for coming and presenting to the members today I want to remind everybody that we do have the PCI safety helpline at optimum-usa.com that web address has not changed and we also have the 800 number available to you we'd love to hear from you love to engage a conversation around this as you can tell Scott and I are kind of safety and insurance geeks we like talking about this stuff so anything we can do to help and at this point Nicole I'm going to turn it back over to you to close this out for the day and thank you very much again perfect thank you Steve on behalf of PCI I'd like to thank Steve and Scott for a great and informative presentation if you have any further questions about today's webinar please email marketing at PCI org thank you again have a great day and stay safe

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