Ways to Limit Workers’ Comp Claims & Fraud

Rick Dalrymple ireport blog

Want to limit your workers’ comp claims and lawsuits—especially fraudulent ones? Of course you do!

We spoke with Rick Dalrymple about the topic, including some of the most common workers’ comp-related behaviors that often kill profitability in a company.

Dalrymple is CEO of RJD Risk Management, Inc., a company that helps CEOs reduce operating and insurance costs. He’s the owner and Senior Vice President of IOA Risk Services, a risk management and insurance brokerage. He’s also author of the number one, bestselling book, “Accidents Waiting to Happen: Best Practices in Workers’ Comp Administration and Protecting Corporate Profitability.”

“In any successful business, in order to create sustainable growth and remain competitive, you must continue to control your operating costs,” says Dalrymple. “One key way to achieve this is of course to reduce the number and cost of your organization’s claims and lawsuits.”

Since so much hinges on workers’ comp best practices—we decided to examine the topic through another lens: the top mistakes leaders tend to make that end up costing them with their workers’ comp handling and admin.

1. Not enough measurement or tracking

So many organizations are lacking a true understanding of their claims process, and more specifically, they don’t have analytics of their incidents and claims.

“More important than knowing your number of claims is having actionable data on hand to skillfully mitigate the risks that are causing your incidents,” says Dalrymple.

What are your loss ratios? What are your incurred losses? Be sure you have a handle on what those meaningful numbers are for your company. It’s about senior leaders and/or safety leaders knowing the story behind those numbers, explains Dalrymple.

Another example: if you have data that you can use, when you need it, are you also able to spot and utilize trends in the types of claims your organization is experiencing?

This is a sign that you have information at your fingertips and you are able to put that knowledge to use. “Without good analytics, it’s difficult to create a targeted plan to reduce any risks.”

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2. A lack of understanding around the true cost of claims

Do company leaders know the true financial impact that incidents and claims have on their bottom line and top line? Many times, they have an idea—but not an accurate picture of those costs!

“OSHA suggests that the indirect cost of claims can range anywhere from a multiple of 1.1-4.5 added to the direct cost of a claim itself,” cites Dalrymple.

“As an example, we had a client that had a $67,000 claim, which was really avoidable. Based on the company’s profit margin when that claim occurred—around 5 percent at the time—this company would have to sell between $1.2-$1.3 million of work to break even to pay for that claim, adds Dalrymple.

“It’s one example that shows just how critical it is that CEOs understand the impact losses have on their bottom line and their top line.”’

3. Not knowing operational blind spots

“The third costly mistake is that leaders do not know their operational blind spots,” says Dalrymple.

Operational blind spots are operational strategies that many times leaders are not fully aware of—or even if they want to play by the right “rules,” they aren’t even aware of the rules to begin with.

“This includes things they need to be doing internally to insulate them from having claims,” says Dalrymple. Consider examining policies and procedures within a company in four main areas: pre-hire, post-offer, pre-claim, and post-claim,” he says.

“In those areas, we’re looking at: What is their hiring process? What are they doing after they’ve offered someone a job? Did they have policies and procedures in place before and after they had their next claim?”

All those areas need to be synchronized properly to help manage the total cost to risk that an organization is going to have.

Workers’ comp and an organization’s RiskScore® (an actual metric Dalrymple has created) in the insurance world can be compared with how an individual’s credit score works. If an organization has a higher risk score, an employer will typically quality for better terms and better discounts that will save them immensely on their next insurance renewal.

4. A lack of consistent systems

George Weathersby, Ph.D., who is known for his thoughts on using systems, has been quoted as saying, “Ordinary people achieve extraordinary results consistently using the system. Extraordinary people…without a system, won’t produce consistent results.” That being said, the benefits of using a system are that it’s replicable, scalable, adds value to the organization, and it reduces inconsistencies—which means it reduces risks.

“By having systems, people can create a predictable [process] for people to follow, and you can replicate and duplicate what needs to be done—in a very systemized and scalable way,” says Dalrymple.

“This is one of the most effective ways to see a dramatic reduction in your number and cost of incidents, and therefore claims. And, it can be taught easily amongst people. It’s more easily disseminated when it’s in system form.”

5. No sense of urgency to change 

“The last costly mistake is possibly the most difficult of all of them, and it’s just simply not taking action.”

Some leaders may just not know where to start. Maybe they don’t know how to approach a systems view, or they delay getting started. Or perhaps they don’t know what tools can help them establish a standard approach for assessing risks and for applying controls, root cause analysis, and corrective action.

One of the keys to success to avoid this common mistake is to integrate as many people as possible into the process.

Next week, in part two in our series, we’ll explore the other key ways to reduce your incidents, and as a result, claims costs, as we unwrap Dalrymple’s DIAMOND Risk Reduction System®.

Create a Consistent Approach for Assessing Risks & Taking Corrective Action

Enabling you to improve your risk management with consistency and data-driven insights, iReport is the ONLY digital workspace that manages workers’ compensation AND safety. iReport allows you to:

  • Avoid complacency and manage risk – Reinforce behavior-based safety practices and stay OSHA compliant with an easy, consistent way to do safety audits, site inspections, and more.
  • Improve outcomes – Have easy access to meaningful data and better utilize reporting to reduce incidents and provide a safer workplace.
  • Implement an effortless incident workflow –  Complete the FROI immediately onsite and manage the workflow with your team collaboratively—helping you to reduce the time spent handling incident reporting.

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