New
WC
System
Helps
Figure
Bottom Line
BY ALFRED G. HAGGERTY
A national workers' compensation insurance rating system that promises great advances in the pricing, marketing and servicing of workers' comp accounts has been developed by a California computer software firm.
The
Workers' Comp
Rating System is a
nationwide, comprehensive, personal computer-based
rating system for workers'
comp, according to its
developer, Michael G.
Smart, president
of Smart-Comp Products,
San Rafael.
He
said the system is
a software package that
allows the agent, broker,
insurance company, risk manager or insurance consultant
to estimate accurately an employees workers' compensation premium and forecast
the true cost of .his losses.
The software takes the workers' comp rating process a step beyond simple experience modification projections, Mr. Smart said. It not only predicts future premiums, but also analyzes the overall financial impact of losses on the insured in areas such as sales dollars, production units, investment income, reduced dividends and incidental costs.
The system has two components:
Mod Calc, which calculates experience modifications; and Premium Analysis, which calculates the true, bottom line cost of workers' compensation losses.
Robert L. King, assistant vice president of workers' compensation underwriting for Fireman’s Fund, which is working with Smart-Comp on the nationwide development of the system, said Mr. Smart is "not compromising with quality and predicted an especially large market for the system.
Mr. King said the Premium Analysis component is an accident prevention and claims management tool and will provide a big advantage for carriers and agents and brokers who want to do a professional job on workers' comp.
Premium
Analysis calculates the "bottom line cost of a workers'
compensation
loss by figuring what the loss will cost in increased premiums, lower
workers' comp dividends or
produce $1,762,728 in sales, or 3,917 units of sale, to
recoup this loss.
By contrast, Mr. Smart said, the loss runs supplied by insurers outline only the losses incurred by the insurer.
The system gets high marks from Karen Wright, a workers' comp analyst with Frank & Hall in Walnut Creek, Calif., who said its accuracy rate in forecasting experience modifications has been *tremendous," coming within a point.
"This is a great financial planning tool for major corporations," she said. It can pinpoint workers’ compensation costs."
Category Breakdown
She said the system also can break down losses by location, job site, department, type of injury-just about any category you can think of." She said this is particularly useful for companies with charge-back systems because it zeros in on exactly where the losses are occurring.
By entering Payroll and loss information, Mod Calc can quickly and accurately forecast the employees workers' comp premiums up to six months before a policy's renewal date.
Mr. Smart pointed out that this enables an employer to forecast expenses more accurately. As a result, manufacturers can better predict production costs and contractors can bid more accurately.
He said Mod Calc is especially beneficial in labor intensive
industries in which workers’ compensation premiums are often the second highest expense factor.
He said agents, brokers and insurers can use Mod Calc to manage their workers' compensation premium cash flow.
For example, an employer with a 15-point increase in its experience modification, a 15 percent increase in payroll and a 9 percent increase in the manual rate should be billed 39 percent more than in the previous year.
However,
if the bill is based on
the previous year’s premiums,
the cash flow
is reduced. Also,
additional billings will be needed
to
increase the account’s deposit premium.
Mr. Smart pointed out that risk managers can use Mod Calc as a loss control tool because it can determine how certain types of claims affect the experience modification and the premium.
The Premium Analysis program can also be a valuable tool for risk managers, he said. In one case a risk manager discovered that when his insurer paid out $25,000 on a back strain claim, the bottom fine cost to his company was more than $66,000.
Mr. Smart said insurers on his client list, in addition to Fireman's Fund, include CIGNA, Fremont, Great American, Hanover, Industrial Indemnity, Pacific Compensation, the State Compensation Insurance Fund, Unigard and Zenith.
Broker clients include. Alexander & Alexander, Corroon & Back, Frank B. Hall, Fred S. James, Jardine, Johnson & Higgins and Rollins Burdick & Hunter.
Smart-Comp provides an initial detailed computer analysis of workers' comp accounts for potential clients at no cost.
This analysis will determine the lowest possible premiums; the true cost of all rating period losses; best available experience modification; as well as savings by altering a loss reserve or loss trend.
For more information,
contact Smart-Comp, Products, P.O. Box 6065, San Rafael, Calif. 94903.
415-925-6750
