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R&R Insurance Blog

Falling Work Comp Rates: The Good, the Bad, and the Ugly

Posted by Dan Scheider

On October 1, 2019 Wisconsin continued its trend entering a fourth consecutive year of reduced workers’ compensation insurance rates.  Rates in 2019 fell an average of 8.84% compared to 2018, which is the most dramatic reduction in over a decade.  This rate reduction will affect work comp policies with renewal dates between 10/01/19 to 09/30/20.

Workers’ compensation rates are state mandated in Wisconsin, meaning all insurance carriers must use the same rates resulting in premiums from one carrier to another are basically the same. 

While at first glance, this appears a “boon” to the bottom line for Wisconsin contractors as work comp premium makes up the lion’s share of insurance costs.

When it comes to the 4th consecutive year of reduced work comp rates there’s “the Good, the Bad, and the Ugly…”

... the Good …

In general, a reduction of work comp rates result in reduced premium costs to contractors.  It’s estimated that Wisconsin businesses will save over $170 million in reduced work comp premiums.

In 2019, the Wisconsin construction industry will see the greatest reduction in work comp premium compared to other industries:

Overall 2019 Wisconsin work comp rate reduction:  -8.84%

Construction

-11.21%

Goods & Services

-8.66%

Manufacturing

-8.11%

Within the various Construction industry class codes, the 2019 WC rate reduction ranges from:

High

Low

-16.4% Roofing

-4.0% Sand & Gravel

-16.0% Carpentry

-7.2% Water & Gas Main

-15.5% Excavation

 

 

Sewer1

 

... the Bad …

To understand the downside of falling work comp rates, a snapshot of the last 4-years is needed.  Overall the new 10/1/19 rates are 24.1% lower than the rates that were in effect on 9/30/16. In the last four years there has been nearly a ¼ reduction in the potential work comp premium dollars available to the insurance market (Construction is over 30%).

Rate Drop

The effect of four consecutive years of work comp rate reductions is a continued deterioration of insurance carrier profitability in writing this line of insurance, which will eventually lead to:

  • Insurance carriers scaling back % of Dividend Offerings (an action that insurance carriers have historically been reluctant to take for fear of a loss of market share)
  • Potential of reduced insurance carrier interest in writing WC coverage (especially standalone WC markets)
  • Potential of rate increases in non-work comp coverage lines to support the overall account profitability
  • Hardening of the insurance market, that already has been seen rate increases over the past few years in Business Auto and capacity limitations on Umbrella/Excess  

... and the Ugly …

Construction companies may be surprised to learn that significant WC rate reductions have an inflationary impact on the Experience Modification Rate (EMR).

It should be noted that this inflationary impact to the EMR will offset to some degree the premium reduction created by reduced WC rates.

Of the many variables that affect the EMR, the below example illustrates the inflationary pressure created by reducing WC rates:

  • “Expected Losses” are the amount of losses that the State of Wisconsin expects to result from the state mandated work comp rate.
  • As the state mandated work comp rates have reduced over the past 4 years (example: -33% in Sewer Construction), the “Expected Losses” that will result from the reduced WC rates also reduce.
  • “Expected Losses” are compared to each construction company’s “Actual Losses” in the calculation of the EMR.
  • The lowering of the “Expected Losses” through reduced WC rates when compared to the “Actual Losses” results in inflationary pressure to the EMR.

The only way to offset this inflationary pressure on the EMR is for contractors to reduce their “Actual Losses”.

Contractors familiar with competitively bidding on large projects know all-too-well the importance of having an Experience Modification Rate below 1.00. Most contractors have seen their EMR increase over the past several years, due in part to the last 4 years of WC rate reductions.

 

What can Contractors do?

Competitive pressure on insurance carriers

  • Start the renewal process early (120 days prior to renewal)
  • Evaluate insurance carriers:
    • WC Dividends Plans
    • Analysis of carriers coverage enhancements and/or restrictions
    • Evaluation of Carrier Support Functions (Loss Control / Safety Services & Claims Service)
    • Carrier dedication to the construction industry (Most national carriers have construction dedicated Underwriting / Loss Control / Claims functions)

Pre-Loss – Safety:

  • Identify who is accountable at each job site for administering safety?
  • Involve the insurance carrier and insurance broker to create an annual service plan addressing:
    • Training (employees / supervisors & foremen / safety director)
    • Jobsite inspections (Are we following our policies and documenting all inspections and corrective action?)

Post-Loss – Controlling Costs:

  • Claims should be reported immediately
    • Statistics confirm a direct correlation between immediate reporting of a WC claim and minimizing the cost of that WC claim
  • Keeping WC claims “Medical Only”
    • “Medical Only” claims (without Loss of Wages and or Disability) are discounted by 70% for the purpose of the impact on the EMF
  • Partnering with an Occupational Medical Provider
    • By having a medical provider familiar with your business, there tend to be fewer hang ups in getting employees to return to work as fast as possible
  • Regularly scheduled mid-term and year-end claim reviews with broker and insurance carrier

  

Applying for available work comp credit programs:

  • Wisconsin Contractors Premium Credit program (up to a 10% Premium Reduction that has no impact on the EMR)
  • Wisconsin Apprentice Credit Program (up to $ 2,500)

 

NOTE:  Some insurance brokers (including R&R Insurance) have dedicated Construction divisions to serve the needs of Wisconsin’s construction industry.

To sum it up, while at first glance the continued workers’ compensation rate reduction that took effect on 10/01/19 may create the appearance of saving “A Fist Full of Dollars” on reduced WC premiums, in reality an objective evaluation would indicated that there is “The Good, the Bad & the Ugly..”.

 

Topics: Workers Compensation, Construction

A Contractor’s Newest Threat or Opportunity – Cyber Insurance

Posted by Dan Scheider

Cyber Insurance for ContractorsCaution is often the reaction I get when discussing Cyber Insurance to construction executives in Wisconsin. From their perspective it would be a nice policy to have should the North Koreans focus their slave hacking force on a plumber in Sheboygan. The resulting ransom of 200 bitcoin for their $200 laptop seems a laughable prospect to a field that generally isn’t tech reliant. The truth, however, is that contractors are a growing target for hackers, but fear isn’t the only reason for a contractor to have Cyber Insurance.

So is greed.

Newly mandated contracts are forcing the conversation of Cyber Insurance between owners and contractors. On October 31, 2018 the American Institute of Architects (AIA) requires the use of their new 2017-revised agreement documents and to toss the old 2007 versions. Among the most standard forms are basic contract agreement between owners and contractors: A101, A102, and A103. All three of those forms have a new section dedicated to Cyber Insurance.

The relevant language begins in the from at section A.2.5.1. This segment encourages the owner to purchase Cyber Security Insurance for any loss or data breach should such an event happen on the job. This represents an opportunity for a contractor to sell the fact that they have 3rd party Cyber Insurance and can cover such a breach. Alternatively this could be a threat should the contractor have no Cyber Insurance and potentially lose out on a bid to a competitor who has said coverage.

Why was Cyber Insurance language inserted in this part of the contract? The AIA believes there is a growing threat of electronic data loss to owners after several real world examples surfaced where negligent contractors were at fault.

In 2013 an HVAC contractor in Pennsylvania was working at a Target retail store. An employee of the HVAC contractor opened a virus laced email. This email stole the identification and password of the contractor and was able to infiltrate Target’s vendor portal. From there the criminals were able to gain access to Target’s internal network. The result was the 5th largest cyber-attack in history and 70 million compromised credit cards.

Beyond encouraging owners to attain Cyber Insurance, Forms A101-3 present easy opportunities for owners to require Cyber Insurance from contractors. Further along in the contracts (section A.3.3.2.6) the owner is given a segment to fill in additional coverages a contractors is required to possess on the job. In the real world we are starting to see contracts requiring a Cyber policy– often with high limits too.

More than just a threat, Cyber Insurance represents an opportunity for contractors. Having a policy ahead of a big job not only protects your company in case of a breach, but also gives the sales or marketing department extra ammunition to make the winning offer. 

Not all Cyber policies are the same. There is a major difference between a first and third party coverage. Contact an agent to work out the best Cyber policy for your business.

Topics: Construction, Cyber

Causes of Respirable Silica on the Construction Site

Posted by Julie LaRose

Stationary masonry saw.jpgWe're often asked, "How do I know if there is silica exposure on my job site?"  While there is a variety of testing that can be done, you can start with 2 basic questions:

  1. What tasks are being done?
  2. What tools are onsite?

Common Tasks that Risk Exposure to Respirable Crystalline Silica

  • Abrasive blasting
  • Tuckpoint grinding
  • Surface grinding
  • Drilling and coring
  • Jack hammering
  • Chipping
  • Cutting and polishing concrete/brick/granite/stone/tile
  • Milling
  • Excavating

Common Tools that Risk Exposure to Respirable Crystalline Silica

When the tools listed below are used on concrete, brick, block, stone, mortar, and other materials that contain crystalline silica there is an increased exposure.

  • Stationary masonry saws
  • Handheld power saws
  • Walk-behind saws
  • Drivable saws
  • Rig-mounted core saws or drills
  • Handheld and stand-mounted drills (including impact and rotary hammer drills)
  • Dowel drilling rigs
  • Vehicle-mounted drilling rigs
  • Jackhammers and handheld powered chipping tools
  • Handheld grinders
  • Walk-behind milling machines and floor grinders
  • Drivable milling machines
  • Crushing machines
  • Heavy equipment and utility vehicles when used to abrade or fracture silica-containing materials (such as hoe-ramming or rock ripping) or during demolition activities, and for tasks such as grading and excavating

When you've identified your risk, or are wondering your level of risk, the next step is to develop a strategic plan to keep your crew safe.  Keep in mind, it's not just about the task at-hand, it's also about what is going on around you.  Contact your KnowledgeBroker or safety@rrins.com to start the discussion.

Topics: Construction

The 5 Most Dangerous Jobs in Construction

Posted by Bill Katzfey

iStock_000070043343_Large.jpgAs one can imagine, the construction industry has some of the riskiest jobs in America. Construction workers face a wide range of hazards at work everyday from falling debris to machinery mishaps and everything in between. Below, is a countdown of the top five most dangerous construction practices.

#5: Working with Power Tools. Although power tools are used in most construction jobs, sometimes the greatest risk exposure occurs during tasks that have become second nature to the worker. Over time, because of the frequency and repetitiveness, employees are likely to overlook the safety precautions and form sloppy usage habits. For instance, did you know that OSHA gets reports of 37,000 emergency room visits a year, just from nail guns?

#4:  Heavy Equipment Operators. Many worksites in construction have large machinery on site. To avoid dangers, equipment operators need to be heavily trained in proper usage of the machinery. Site planners should be aware of the surroundings and be careful not to bring equipment into an area where it’s not suitable. Also, to avoid failure, machinery should be carefully inspected on a regular schedule.

#3: Sewer and Duct Construction. While working in confined spaces, it is important that proper ventilation is secured before sending any crew into a tight space. Furthermore, in the case of an accident, emergency escape routes should be in place if possible. If not, only the most trained individuals and properly maintained tools can help reduce the risk of suffocation or getting trapped.

#2: Demolition Jobs. Jobs in demolition rank high on this list because it is the most unpredictable job in construction. It is hard to calculate how gravity and other factors will affect a piece of falling material. However, many of the risks of demolition actually can be avoided with proper planning. Electrocution, for instance, is a common demolition injury that safety measures could prevent.

#1: High-Rise Construction. Working at heights is the #1 most dangerous construction job. Fall accidents make up 40% of construction-related deaths, and countless more injuries. The higher the building, the higher the risk. Other inherent risks include harsh weather – especially during the Wisconsin winter months, fire, and high winds. The type of work being done up in the air also influences the amount of risk. Concrete work and lifting with cranes rank among the most dangerous.

Risk awareness promotes safety and can help prevent injury or death on the jobsite. Partnering with the right agent provides you and your employees with the proper safety information and guidance to minimize construction hazards.

Questions regarding your safety program? Contact safety@rrins.com

Information provided by Insured Solutions Inc.

Topics: Construction

OSHA Delays Enforcement of Crystalline Silica Standard

Posted by John Brengosz

On April 6, 2017 the U.S. Department of Labor’s OccupationalOSHA.jpg Safety and Health Administration announced a delay in enforcement of the crystalline silica standard that applies to the construction industry in order to conduct additional outreach and provide educational materials and guidance for employers.

The agency has determined that additional guidance is necessary due to the unique nature of the requirements in the construction standard. Originally scheduled to begin June 23, 2017, enforcement will now begin Sept. 23, 2017.

OSHA expects employers in the construction industry to continue to take steps either to come into compliance with the new permissible exposure limit, or to implement specific dust controls for certain operations as provided in Table 1 of the standard. Table 1 matches common construction tasks with dust control methods, so employers know exactly what they need to do to limit worker exposures to silica.

Construction employers should also continue to prepare to implement the standard’s other requirements, including exposure assessment, medical surveillance and employee training.

For more information, visit www.osha.gov or contact a Knowledgebroker.

Topics: OSHA Compliance, OSHA, OSHA standards, Construction

Top OSHA Citations for 2016

Posted by Maureen Joy

OSHAEvery October OSHA releases a preliminary list of most frequently cited safety and health violations for the fiscal year.  From 32,000 workplace inspections, topping the list for 2016 top hazards include lack of adequate fall protection, unsafe scaffolds, hazard communications problems, and lack of machine guarding.

According to OSHA, "one remarkable thing about the list is that it rarely changes.  Year after year our inspectors see thousands of the same on-the-job hazards."

From the OSHA website, consider this list a starting point for workplace safety:

  1. Fall protection
  2. Hazard communication
  3. Scaffolds
  4. Respiratory protection
  5. Lockout/tagout
  6. Powered industrial trucks
  7. Ladders
  8. Machine guarding
  9. Electrical wiring
  10. Electrical, general requirements

While the list is not all encompassing, employers are urged to go beyond minimal requirements to create a safe working environment.  A culture of safety has been shown to reduce costs, raise productivity, and improve morale.

Related content:

OSHA Webinar Series
OSHA Inspection Guide
OSHA - New Electronic Recordkeeping Requirements

Topics: OSHA, Construction

Contractors Premium Adjustment Program

Posted by Julie Liebelt

Spring is full of reminders: turn your clocks ahead, replace the batteries in your smoke detectors and file your submission for the Wisconsin Contractors Premium Adjustment Program credit (WCPAP). The attached document offers information on how to submit your payroll data to the Wisconsin Compensation Rating Bureau for consideration. The due date to submit your information varies by your policy's effective date. Please see the FAQ section of the WCRB website to determine when your information is due. For contractors who have policies renewing in summer, your submission is due very soon.

Don't hesitate to contact your agent if you have questions about this process, or if you would like information about your past credit(s).

 

Topics: Workers Compensation, Business Insurance, Construction

Landscapers and Lawn Care Operators urged not to use Imprelis

Posted by Julie Liebelt

A recent article in Lawn & Landscape advises that DuPont Professional Products has cautioned lawn care operators of the damage to conifers and other trees potentially caused by the use of the herbicide Imprelis™. Click here to read the online article in Lawn & Landscape.

Topics: DuPont, lawn care operators, Imprelis, LCO, Business Insurance, Construction, landscapers

Build Bonding Credit With Construction Funds Control

Posted by Jay Zahn

BondingContract Bond underwriters traditionally screen potential bond customers (contractors) on the basics of 3 C’s Capacity, Character and Credit. The 3 C's are usually defined as:

  1. Capacity: to complete the work, the resources of manpower, equipment and track record of completing work in the category of the work contemplated.
  2. Character: the background and history of the contractor are positive indicators leading the bonding company to believe the construction company will endeavor to complete the work contemplated.
  3. Credit: A combination of financial statement and borrowing history which builds a case that the contractor has sufficient working capital, equity, profitability, and a bank relationship which all will assist the contractor in completing the work contemplated.

It takes a combination of these 3 basic measurement elements to potentially qualify for a bond. Recently with shrinking profit margins, and available work, we are encountering contractors who are strong in relation to capacity and character, but whose credit has eroded over the last few years.

In cases where credit has eroded, surety professionals at R&R Insurance will suggest the use of funds control to secure bonds for contractors seeking bonds in Wisconsin.

Funds control simply stated is a system of parking a job’s revenues in an escrow account allowing the bonding company to be sure that the stream of revenues are going to satisfy job costs associated with the project at hand. Once costs are validated, project revenues are then disbursed by the escrow agent who uses those funds to pay the suppliers, subcontractors, and contractor at regular intervals throughout the duration of a project. This ensures that at the end there is a reasonable expectation that job costs are satisfied and profits can be realized.

Wisconsin contractors interested in improving any of their 3 C's or Wisconsin contractors interested in fund control options should contact Jay Zahn, Surety Specialist at R&R insurance Services.

Topics: eroded credit, Jay Zahn, Bonds in Wisconsin, Business Insurance, contractor, Wisconsin bonds, contractor credit, Funds control, Construction, Bonds, Contract Bond, credit has eroded, surety professionals

Roof Anchor Is Solution to OSHA's New Residential Fall Protection Rules

Posted by Paul Seitz

 

In June 2011, OSHA implemented their new residential fall protection rules. This short video explains a common sense approach to comply with these new rules. A copy of the new rules can be obtained by visiting www.OSHA.gov. This video addresses how these new rules affect the obligations of the general contractor. These rules apply to any tradesmen that work more than six feet off the ground or a lower level.

View OSHA's directive.

The new rules require fall protection for any employee working on the roof. The historical problem with this approach is that residential structures do not have an obvious attachment point for a harness. Commercial structures usually have flat roofs so a guardrail system can be used in that scenario. The pitched roofs on residential structures, with their gable ends, make the guardrail solution impractical.

Connection DiagramBy using the DBI Sala U-Bolt Roof Anchor, a personal fall arrest system can be easily attached to a pitched roof. The homebuilder supplies this device.

 

DBI SALA U-Bolt Anchor System The framing contractor attaches the anchor to a roof truss while the truss is on the ground.

 

Roofer Attached with Roof Anchor System The roof anchor is easily incorporated into a contractor's use while on the roof.

An additional benefit to the homeowner is that the anchor is a permanent installation. It's there for the homeowner to use for future maintenance needs.

Wisconsin businesses, for more information on OSHA compliance issues contact knowledgebroker Paul Seitz 262-953-7245.

Topics: Safety, OSHA, Framing Contractor, DBI SALA U-Bolt Roof Anchor, Business Insurance, Construction, Residential Fall Protection, Paul Seitz, Resdiential Fall Protection Rules