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Many companies attempting to navigate the choppy waters of workers' compensation fail to see what a certain famous luxary liner also overlooked: There's an iceberg of workplace accident costs that should be avoided at all costs.
      Workers' comp costs are similar to an iceberg in more ways than the obvious. The part of the iceberg that is visible is similar to the direct costs of an accident claim, while the larger, indirect costs remain hidden beneath the surface. And it's these costs that can do the real damage to your company's bottom line.
      Mary Murray, president of Work Smart, a company specializing in workes’ compensation loss-cost analysis, says that there is an almost universal need for knowledge among employers when it comes to the true hidden costs of workers’ comp claims.
      "Employers often try to downplay the costs of accidents by saying that they are covered by insurance," says Murray. "Their attitude is often: ‘ My claims don’t cost me anything. Isn’t that why I have workers’ comp?"
      That can be an expensive misconception, obscuring the exorbitant costs that injuries subtract from the bottom line, says Murray. There are many less obvious, indirect costs that are usually uninsured and can drain a company’s funds:
· Time lost from work by the   injured employee.

· Damage to company morale.

  Cost of breaking in new   employees

· Loss of production.

· Possible Damage to equipment.
     In fact, according to most insurance loss-control experts, the indirect costs of workplace injuries can range from twice to as much as 17 times the face-value of the claim.
       There are some practical steps employers can take to reduce the costs of injury claims, most of them involving bringing the true and complete costs of injuries into the light. Knowledge about the insurance industry, better workplace communication and implementing a workers' comp tracking and analysis system are ways that employers can get control of the costs - both direct and indirect - of workers' compensation claims.

Lost in the Maze
One of the first things Murray addresses when working with clients is the impact of claims, especially, frequent small claims, on the insurance rating of the company. She offers an example of a $2,000 claim, which will likely be paid by the insurer, but will then be factored into the experience rating of the employer, affecting premiums for three years. "What is lacking is a full consideration of the complete costs of work-related injuries on premiums," says Murray. "Each workplace injury that results in a claim drives up employer costs through increases in workers’ comp premiums, which are
hard to track because they are buried in the complicated maze of the insurance rating system," Murray said. "Combine this with the indirect costs of a claim and we're talking big money.
" For example, a $29,000 carpal tunnel claim can actually cost an employer $37,400 in

premiums over three years. And adding in the indirect costs can push the total to $71,450. A lumbar injury from heavy lifting in a factory or on an assembly line could start out as a $65,000 claim, but it can generate $58,645 in additional premiums and jump to $131,380 when indirect costs are factored in.
      Murray, who recently tracked losses in the trucking industry, presented her findings in a language that was easily understood: to cover the bottom line total, (indirect and direct) costs of a dozen $500 comp losses, a trucker would have to drive almost 450,000 miles, or 17 times around the earth.
      Unfortunately, the complexity of workers' compensation rating systems is usually not fully explained to employers by the insurance industry. Murray suggests that employers urge their agents to help them proactively get control of premium increases. "Employers should ask insurance agents with help in tracking losses and identifying trends about where and why injuries are happening," she said.
      Thomas Lundberg, president of Shadetree Landscape, and author of the book "Slash Your Workers' Comp Costs," agrees with Murray that knowledge is power when it comes to lowering workers' comp costs. "Getting a grip on the hidden costs of claims involves insider knowledge," savs Lundberg. "The workers' compensation industry is highly misunderstood by employees and employers alike, and the reasons behind those costs are misunderstood."
      Lundberg believes that the way to avoid the exorbitant hidden costs of claims is simple: pay attention. Lundberg says that he lowered his claims, and subsequently cut his insurance premiums in half, by observing vigilant safety practices (such as installing anti-skid foot holds on all of his trucks), and by aggressively pursuing the insurance carrier for information.
      "Employers have to treat injuries to their employees very seriously," said Lundberg. "Unfortunately, we have a very complex system that isn't really designed for lay people to understand. A business owner has got to take an active approach in finding out if there's an active reserve, what the standing is, and what would be necessary to close it. The whole thing could be solved with a simple phone call, or a medical statement from a physician.'

An Atmosphere of Continual Improvement
To stamp out excessive injury claims and the costs that accompany them, it is important to take a proactive attitude toward workplace injuries that involves employers, employees, and insurance carriers. Eliminating unnecessary claims costs can be surprisingly easy if employers have the cooperation of all people involved.
Creating an atmosphere that encourages employees to speak up about injury risks and early warning signs is key. But according to Phil Mullhollon, manager of workers' compensation for the Chevron Corp., one of the hidden cost factors of claims is safety incentives. "The downside to the safety incentive program is that it can create a lack of communication between the employees and their employers;' Mullhollon says.
And that can have a direct and often overlooked impact on claims."
Mullhollon believes that safety incentives can sometimes be detrimental because companies

"continually "up the ante" with more lucrative awards for lowering claims. This not only keeps employees with their eyes solely on the prize, but also makes them reticent to mention an injury that could affect their safety bonuses.       "Safety incentives exist to make people cognizant of safety issues," Mullhollon says. "However, because there are great rewards for having a good safety record, more and more people are reluctant to report an injury when it's in the early phases. If some one feels reluctant to report an injury when it first appears, by the time they finally do report it the situation may require surgery or extensive time off, when a physician could have treated the injury conservatively at its outset.      Building a close relationship with injury-related vendors is another strategy. Lorenzo Alvarez, Loss Control Supervisor at William Bolthouse Farms Inc., believes it is important for employers to partner with their health care facilities, to get them connected in the daily workings of the business in order to keep down the cost of claims. "Our facility has over 2,300 employees and produces a sizeable percentage of the world's carrots,' Alvarez says. "So we carefully select the health care facilities that we use, making sure they are specialists in industrial medicine and that they understand the type of work we do."
     When developing claims cost reduction strategy one of the most important aspects is getting a handle on a workplace and its history of claims. It is important to track, and allocate all claims to both determine the real cost of a company's injuries and to identify the source of problems.
      Murray's company has developed a software package that assists CFOs and insurance loss departments in gathering and analyzing the nature of their workers' compensation claims. For example, Work Smart helps employers generate an "Anatomy of Bottom Line Cost" chart which displays the origin and cost of all workplace injury claims, FUTURE premium costs, and the indirect costs of injuries.
      "Excessive injury costs take money away from businesses that could have been used as working capital, for future investments, or for shareholder dividends" says Murray, who hammers home the point that although it may require work to uncover the hidden costs of workplace injuries, it is effort well spent.
      "It may seem like an inconvenience to track losses across an entire company," says Murray. "But if you consider that just one $500 class on lifting techniques, or one $500 software package that tracks and allocates losses, can potentially eliminate tens or hundreds of thousands of dollars in claims and future comp premiums, I think it's easy to see that this is an investment companies can’t afford to pass up." Joshua Brandt is a freelance writer based in San Francisco, California. Mary Murray is a workers' compensation consultant based in San Francisco, California, with over 14 years experience in the insurance industry, she has consulted with hundreds of firms to analyze and lower their workers' comp premiums. Her newly developed software product, Work Smart, is designed to help employers take charge of claims while lowering their workers' compensation costs. Contact Mary at 415/ 925-4040 or visit her web site at www.smart-comp.com.