In this interview, we do a deep dive into the world of Worker’s Compensation for construction companies with an insurance industry insider. Kenan Knight has been in commercial insurance since graduating college. With over 15 years of experience helping contractors with both employee benefits and property and liability coverage, he provides us with insight into how Workers’ Compensation policies work, why you need one, what is a modification rate, and how it impacts your business in a variety of ways.

We explore how workers’ compensation works, what does it pay for, when does it kick in, what is the contractor still liable for, and how to calculate the true costs of insurance and worker injuries to the company. We discuss how deductibles work, and what strategies can be used to maximize the benefits of your workers’ compensation policy while keeping premiums down.

We discuss how is the mod rate is calculated, what factors contribute to this equation, and how it affects the cost of your Workers’ Compensation coverage. We discuss how differences in the way a company classifies and reports a worker injury can have both short-term and long-term impacts on the business, and how to really think about and interpret your policy.

We learn a few simple ways to reduce policy costs and discuss industry best practices that contractors can use to minimize the financial impacts of worker injuries to their company while still staying in compliance with all laws, regulations, and policies.

We learn what contractors can do to protect their workers, and themselves, from long-term financial impacts from a jobsite injury, the differences between recordable injuries, non-recordables, lost time accidents, and how light-duty return to work policies can benefit a construction company.

You’ll also gain insight into how general contractors interpret your mod rate, and how it impacts your ability to win work. What are contractors looking for when they ask about your mod rate? Why is it so important to them? What can you do to position yourself above your competition?

To learn more about the ABC's of Experience Ratings, click here.

Enjoy this spirited and lively conversation and leave us your comments and feedback below.

Visit Kenan on LinkedIn

Video Transcript:

Adam Cooper:

Alright … so, Kenan Knight with McGriff Insurance … tell us a little bit about yourself and what we’re going to talk about today.

Kenan Knight:

My name is Kenan Knight, I’m with McGriff Insurance Services in Kennesaw, GA. I’ve been in insurance since I graduated college essentially in 2006. I started on the employee benefits side. For the last 10 years, I’ve been on the property and liability side. I specialize in contractors, which is how I’ve gotten to know Adam, doing a lot with electrical plumbing and HVAC folks. But you know – drywall, masonry, you name it. It’s kind of anything in that contractor world.

So, today what we’re going to talk about is workers compensation, a huge point of emphasis for contractors especially. Guys doing commercial jobs for GC’s … it’s an especially big deal because a lot of times, you won’t even get a look if your mod is over 1.0. Because it shows you’re having issues with safety on job sites, your workers are getting hurt, and obviously, that can roll uphill to a GC on a job site if things go really badly. They don’t want the delays, they don’t want people getting hurt on a job site. A lot of people obviously have good relationships with their General Contractors or builders that they do a lot of work for. So, they’ll get the jobs if they have a mod above 1.0, but for that usually you’ve got to write letters of explanation and get into lots of details of why your mod is above a 1.0.

Adam Cooper:

Do you find that a lot of generals are requesting that in the bid documents?

Kenan Knight:

Oh, everybody.

Adam Cooper:

Everybody’s proposals now?

Kenan Knight:

Yes, yes, everybody. You have to have it in there, what your experience mod is. So, you know, let’s say in the Atlanta market. A lot of people might work for Brasfield, or Choate. If you do jobs for them all the time and you’re above a 1.0, you stand a chance, you’re still probably going to get those jobs. But, if you’re bidding on with folks that you don’t really know, you’re just putting bids out to win jobs and you’re above a 1.0, a lot of times it will just kick you out. You may not know that, but you’re going to put it in your RFP what your mod is, and probably what it has been for the last three years, and you just may never get a call back.

Adam Cooper:

And the mod range is calculated … is it injuries per 100,000 hours worked? Is that how it’s calculated?

Kenan Knight:

Well, we’ll get into that. There’s a lot that goes into that. We’ll go over the basics, and then like I said, I’ll send a link that explains exactly how it is if people really want to get into the weeds. But we’ll get into some of the basics of that. So, of course the other part of that, really what the mod is telling everyone who looks at it, so GC’s, builders, potential employees, you know – they may look at your mod, your insurance carrier, of course your workers comp insurance carrier is looking at your mod, that’s maybe where it has the most effect. It’s basically benchmarking you against other companies in your same industry, in your same region of the country, and your same size. You know, an average size. That’s what it’s doing.

So typically, a mod could go from, let’s say, a 0.75 all the way up to, let’s say, a 1.60. Now, I say typically because, depending on the size of your business, that’s how wide of a spread that could be. So, if you’re a smaller company and you don’t have a lot of payroll, the lowest mod you can have might be a 0.92, or a 0.88. The bigger payroll, the bigger company, you may be able to go down into the sevens or the sixes. So, what that’s really saying is a 1.0 is an average mod. That means NCCI [National Council of Compensation Insurance] expects you to have $35,000 in claims in a year, based on your type of business, you’re an electrical contractor, and you have half a million dollars in payroll. Based on all of their data, they say ‘Okay, we expect you to have $35,000 in losses in a year. If you’re right there at $35,000 in losses in a year, your mod would be a 1.0. So, they’re saying ‘You’re average, you’re what we expect.’ If you’re really good, if you have a good track record, you don’t have injuries or you don’t have claims, I should say, on your workers comp experience, then it can go down below a 1.0. So, let’s say you have a 0.80 experience mod, a 0.80. Well, you’re getting a 20% discount, essentially, on your workers compensation.

Because most guys are going to be familiar with this, and it kind of got into what you were asking earlier Adam – let’s say your workers comp is with Amtrust. For your electrical contractor, Amtrust’s rate per $100 of payroll is $3, for simple math. So, for every $100 in payroll you pay an electrician, it’s going to cost $3 in workers compensation. That will tell you your Gross Workers Comp cost. So, I’ve got $500,000 in payroll. For every $100, I’m paying $3, that’s X amount. But then below that, what people are familiar with seeing, you have all these discounts and debits below that. So, if you have a $1 million limit, as opposed to a $500,000 limit, that’s a very small increase but that may cost you $300 per year. So, you’ll see that down below.

Let’s say you carry a deductible, that will have a discount. So maybe that discount is $300 per year. Then in Georgia, you can have a Drug-Free Workplace credit, that’s a 7.5% discount. So, let’s say that’s $7,000 per year. Then your experience mod is in there, so if you have an 8.0, that’s another 20% discount off that top-line number. Let’s say you have claims, and you’re a 1.2. Instead of a 20% discount, you’re getting hit with a 20% debit. So, you’ll see people, you’ll look at their work comp schedule, and they may be paying an extra $20,000, $30,000 a year because their experience mod is high. So, it’s very important to control, it’s dollars to your bottom line in insurance costs, and it’s also dollars to your bottom line in not getting jobs, not getting the looks, because you’re above a 1.0.

Adam Cooper:

It figures into the payroll calculations too. When they’re doing estimating, they have to know what their actually fully burdened rate is, and workers comp is a component of that fully burdened rate.

Kenan Knight:

Correct. So, a lot of times, contractors will want to know what your net rate is. That’s where you take that top line, that gross number, but then you take all those debits and credits, and you come up with your net rate per 100. So, obviously the lower your net rate is, the better. That helps you in bidding jobs, in putting more competitive bids in because you have more competitive work comp costs. So, all of that stuff comes in too. The lower that net rate, even if your rate per 100 may be higher than the next guy’s by 40 cents per 100, or 8 cents per 100, it’s all over the board depending on carriers and all that. But if that mod is lower, then it can really help that net rate.

Adam Cooper:

Okay. I heard you mention the Drug-Free Workplace discount. I know that some states also offer what they call I think a Hands-Free Auto policy where you have every employee sign a thing that says they won’t talk on the phone when they’re driving, or they’ll use a hands-free connection like a speakerphone or headset while they’re driving. I’ve heard that can give a discount on workers comp as well. Have you heard that?

Kenan Knight:

There’s not a direct percentage, like, ‘Hey if you have everyone sign this, we’ll give you a 3% discount.’ But those are things you need to relay to your insurance agent so he can relay it to your underwriter with whoever you’re insured with, whatever carrier you’re insured with. That will factor in, but the Drug-Free Workplace discount is a set discount. So, in Georgia, if you qualify for Drug-Free Workplace, and I can go into what that is, it’s very simple to do. You print off that little gold certificate, you pay the state of Georgia $35. You print off that gold certificate and you send it to the insurance company, and you get a 7.5% discount. So, if you don’t have a Drug-Free Workplace program, if you’re not sending that into your insurance agent, then you’re literally paying 7.5% too much for your Workers Comp. Period. Simple as that. It takes 20 minutes to do.

Adam Cooper:

So, how does that play into states where marijuana is legal?

Kenan Knight:

That’s a great question, and that’s been an issue. The best answer is really, it’s no different than saying alcohol is legal, drinking alcohol. But you can’t show up to work drunk, right? You can’t drink on the job. I know it’s a little different, because with alcohol you can drink on Sunday, show up to work Monday and be fine. Nobody’s testing you for alcohol. Where Marijuana, you could get off work Friday, smoke Friday night and get drug tested Monday, you’ll fail even though you’re not ‘high’. It’s still in your bloodstream. If you want to be a certified Drug-Free workplace, and you’re going to drug test your employees, even if it’s legal, that doesn’t mean it’s beneficial for your contracting company.

Adam Cooper:

Are they making any exceptions like, ‘Drug-Free Workplace, except Marijuana’ in those states yet, or not?

Kenan Knight:

No, we have not seen that, and really because it’s not saying it’s morally bad, or it’s illegal obviously anymore in a lot of places. What it is saying though, is this is all a function of a safe work environment, and a guy who’s smoking marijuana regularly is probably not going to contribute to a safe work environment. Not that it’s necessarily bad, not that it’s certainly illegal anymore in a lot of places. In Georgia specifically, to have the direct to qualify for the Drug-Free workplace, you do not have to drug test people on any set standard. You know, ‘Hey once a month you’ve got to drug test everybody, you have to do randoms on everybody.’ Basically, what you have to do to qualify is you have to do pre-employment [drug-screening]. So, before you hire a guy, you have to send him to get a drug test, and you have to do post-accident. That’s a law anyways, at least in the state of Georgia.

So, if a guy falls off a ladder, when you send him to NOVA, or Concentra, or wherever you send your guys when they get hurt. They drug test them when they get there. Period. End of story. That helps you, because if the guy has drugs in his system, they throw that out. That’s not a work comp claim, he’s violated the work comp statutes. So, you want to do that. It helps the business owner. That’s really what you have to do, and you do have to have a provision to be able to do random and suspicious drug testing, but you don’t have to do it. You just have to basically have your employees sign saying you have the ability to do it, it’s got to be in your handbook, but there’s nobody coming around saying ‘Hey, you have this Drug-Free workplace certificate, when’s the last time you did a random drug test?’ That does not happen.

Adam Cooper:

Okay.

Kenan Knight:

I’ll kind of start and just walk through some of the generalities of workers comp from the very beginning, some of the questions that I frequently get. One is, ‘Hey do I have to have it? Most of my guys are 1099’, or ‘I don’t really have many employees.’ I’ll just start off by saying, this is specific to the state of Georgia. Most states are very similar, some states could differ, but for now, we’re talking the state of Georgia. If you have 3 or more employees, you have to have a workers comp, even if those 3 might be part-time, they only work 20 hours per week. Let’s say, Adam, you and I own an electrical contracting business together, and we have 1 other employee, but me and you exclude ourselves from workers comp, which owners and officers have the ability to do. So, we say ‘We’ll exclude ourselves, so we really only have 1 employee on, so we don’t need workers comp.’ In the state of Georgia, even if we exclude ourselves, we do count towards that count of 3. So, if you have 3 guys that own a business together and you’ve got 2 guys who work for you, you still have to have work comp, even if all 3 of you exclude yourselves and only 2 guys are technically employees. For Work Comp, owners and officers, even if they exclude themselves, are counted.

In general, what workers comp does is it pays for medical care if you get hurt on the job, and it pays for indemnity to the worker, which means essentially, lost wages. So, if I get hurt, I fall off a ladder, I break my leg and I go to a hospital, they do X-rays, they set my bone, they put me in a cast. I have 4 follow-ups, and those medical bills are $25,000. Work comp pays for that. I miss a month’s worth of work, and let’s say that’s $6,000 in payroll. Work comp is going to pay me 2/3 of what I would have earned. And it does max [out], it’s $675 per week in the state of Georgia. So, there could be a gap there for higher earners, work comp may not make up for all of it. This is a different discussion for a different day, but the way to offset that, especially for your key employees or higher earners, is to get a Long Term and a Short Term Disability policy for them … Because with Work Comp, if you have a guy making you know, $60,000, $75,000, $100,000 a year, and he goes on work comp, he’s not going to be made whole on that work comp policy. But that’s what workers comp does, it’ll pay for your medical bills, it’ll pay your wages if you miss work, and of course ongoing care. If you’ve got to go to therapy and work that leg out, it’ll continue to pay for that.

Of course, a lot of times what we see, especially these days, are work comp settlements. A guy hurts his back, he hires an attorney, and they sue your work comp. You go back and forth, and you settle for $50,000. Part of that settlement is almost always that that guy can no longer work for you ever again, and he has no other claims against you. Which is why carriers will settle that comp claim a lot of times, because he can’t come back years later and say, ‘Oh my back, now I’ve got a degenerative disc caused from this, I need another $100,000.’ Once they take that settlement, they’re done.

The first 7 days that an employee’s misses work, they’re not getting paid for those 7 days. You can almost think of it like a big deductible for that employee.

Adam Cooper:

Okay, interesting. I didn’t know that.

Kenan Knight:

Yeah, so if you have a guy and he sprains his ankle walking a job site, he steps in a hole and sprains his ankle, and you say ‘Hey man, let’s go get your X-ray checked out’, and they X-ray it and say ‘Hey, it’s not broken, it’s swollen, you need to take 2 days, ice it, elevate it, you know, and see how you feel.’ Those 2 days he misses, he does not paid by workers comp for those days.

Adam Cooper:

Do most employers pay that out of pocket then?

Kenan Knight:

I would say so, or they take a sick day, or PTO, or whatever it has. But it depends. A lot of times, the company will just pay the guy the 2 days, but again, that’s all up to the employer. A lot of times they’ll say, ‘Hey look man I’ll pay you, go ahead and get rested up and I’ll see you in two days when you feel better.’

That’s a great question to lead us into how your work comp mod is actually made up of, and how it gets set. So, it’s looking for really 2 things: It’s looking for frequency of claims, and the severity of claims. The way that NCCI really measures that is through what’s called a ‘split point’, and what that means is in the state of Georgia again specifically, the split point is $18,000 of any 1 claim. So, the first $18,000 of a claim counts against you, it’s weighted at 100%. Everything above the $18,000, they say ‘Okay this is kind of a shock loss, this isn’t expected, this is kind of a one-time type of thing. So, we’re going to discount everything above $18,000 on any 1 claim.

What that does is … let’s say you have five $10,000 claims in one year, that’s $50,000 in work comp claims. But, each one of those is weighted against you at 100%, because they’re all below that split point of $18,000, they’re all $10,000 claims. Let’s say your company does that. My company, I have a $50,000 claim but it’s only one claim. One guy got hurt pretty bad. That $18,000 split point is going to protect me because only the first $18,000 of that claim gets weighted 100% everything above that gets discounted extremely heavily. So, my mod is going to be lower than yours when all that gets calculated in, because I only had one claim and that split point protected me, even though it was a severe claim. You have a frequency problem. You had five claims, they were all $10,000. Every single one of those claims affects you at 100% of that split point.

Adam Cooper:

So, indicating more of a chronic safety problem…

Kenan Knight:

… A chronic issue, correct.

Adam Cooper:

As opposed to a one-time acute incident.

Kenan Knight:

I had something random happen, a guy got hurt, but it shows that my record is better than yours because I only had one claim that year. Granted, it was bad, but that’s not expected, that’s not going to happen every year.

Adam Cooper:

Is that split point set across the board? All the carriers use the same split point?

Kenan Knight:

NCCI, which is in 26 states, uses that split point. Underwriters also look at frequency vs. severity. So, not only is your mod going to be affected worse by the frequency, the underwriter also has a say in now much he’s going to charge you for workers comp, which is called a ‘schedule mod.’ So your NCCI, or your experience mod, that’s an experience mod that has a factor, and then the underwriter has what’s called a schedule mod, and he’s got factors he can apply to charge you more or less. Typically, the underwriter will stay in line with your experience. So, if your experience is an 8.0, your schedule mod is probably going to be an 8.0 or close. If your experience mod is a 1.2, your schedule mod from the underwriter is probably going to be right around a 1.2. So, it’s a compounding effect.

Adam Cooper:

They aggregate right, that’s not … it doesn’t carry through. It’s like, one and the other. They accumulate.

Kenan Knight:

Correct, correct. So, it’s another reason to keep that experience down, because then the underwriter is going to follow suit for the most part. The split point is important. You don’t want frequent claims, you’re going to be penalized for that, as opposed to the one-off claim that might be more severe. That split point is going to protect you.

The other thing that’s going to protect you is having a ‘medical-only’ claim. Another part to that is, as an employer, as a company, having what’s called a Return-to-Work Light Duty Program … So, what that means in real life is … I’m an electrician, I’m out working on the job sight every day. I’m pulling wire, and my shoulder pops, and I cannot get my arm above my head to pull wire right now. I go to the doctor, and they say ‘You strained your rotator’s cuff, it’s not torn but you need surgery. You need a good physical therapy, and you need to be on light duty, you do not need to be doing any overhead work for at least the next two weeks.’

Okay, so what do I do for the next two weeks, because that’s over seven days of work. If you have a medical-only claim, if me going to physical therapy, if me going to get the MRI on my shoulder, if that’s all that work comp pays, let’s say that’s $3,000 worth of claims. That $3,000 gets discounted by 70% when my experience mod gets calculated. If they only pay medical, if they don’t pay me for missed time, whatever is pad in medical gets discounted by 70%.

So, the way to make that happen is you have to have a Return-to-Work Light Duty program in your handbook that all of your employees sign and agree to. So, I come to you and I say, ‘Hey Adam, you know, my rotator’s cuff is not torn, but I’ve got physical therapy, I can’t do anything above my head for at least two weeks, and then I have to get re-evaluated.’ You’ll say, ‘Hey Keenan, no problem, we’re going to put you on Light Duty, and I’ll pay you your full salary, but what you’re going to do is you’ll just walk the job sites and kind of double check everybody’s work and do things that you can do that don’t require you to go overhead and pull wire.’

Adam Cooper:

You could even come to the office and help out with us, maybe.

Kenan Knight:

You can come to the office and help around the office, oh yeah.

Adam Cooper:

Or you’re doing trim work, you’ll pulling switches and plugs and kind of stuff where you’re not going overhead.

Kenan Knight:

You can call … let’s say, in today’s world, we all know getting material is a problem. You can sit in the office and call suppliers and look for material for your light duty. The larger the company, then the more issues you may have with work comp claims. Some people take a very hard line on this, and your light duty may be, especially for guys who might not be your key guys, or guys who think are trying to play the system, you can have them count paper clips in the office. ‘Hey, we’re doing office inventory, I need to know how many paper clip boxes we have, how many alligator clips we have, how many pens we have, and how much copier paper we have.’ So, you spend your days counting that.

Now, that does two things. You say, ‘This stinks, I’d rather be out working’, so you don’t milk that work comp clam for as long as you can. And again, what it’s really doing is it’s keeping you from your carrier paying the indemnity payment for him having lost time, and it’s reducing that claim significantly for you.

A lot of times, you’ll see or you’ll hear ... you’ll see it in factories, you know, huge factories with a sign out front that’ll say ‘572 days no lost time’. That doesn’t mean they haven’t had an injury in 572 days, or even a work comp claim in 572 days, but it means that nobody has lost time in 572 days. So, somebody gets hurt – they put them on a light duty job that they can do.

Adam Cooper:

Very interesting. It’s a good way to maximize your benefit without it impacting the company’s bottom line or jacking up your rates.

Kenan Knight:

One hundred percent, one hundred percent. So, kind of as a recap so far, if you don’t have the frequency, you’re helping yourself because of that split point. And, if you have a medical-only claim, it gets reduced by 70% when it’s factored into your experience mod. The way to make sure you have mostly only medical-only claims is to have a good Return-to-Work Light duty program, and a lot of guys especially in smaller companies say ‘Keenan, I don’t have any light duty for them to do. I’ve got one office lady and I run some of the office, and all of my guys are in the field.’ It doesn’t matter – find a light duty job for them to do. Put them in the warehouse and have them answer calls from the field guys, calling and saying, ‘Hey I need such and such gage wire, do we have any in the warehouse?’

Even if he sits there all day, in the long run, it’s going to save you so much money to pay the guy to sit there and do that. And a lot of times, because work comp only pays them 2/3 of their normal salary, max $675 per week, you can pay them 2/3 of the salary while they’re on light duty.

Adam Cooper:

Oh, okay.

Kenan Knight:

Now, again, leave that up to the owner because he may not want to make that guy mad, you know? If it’s an important guy, you may not want to do that to them, you can pay them full. I’m just saying, you do have the ability to pay them 2/3 of the salary on light duty.

Adam Cooper:

Okay, and you’d also be paying them right away? Because there’s also going to be that seven-day gap between when the workers comp kicks in for salary coverage anyways.

Kenan Knight:

Correct. And that’s a good point Adam. Let’s say I get hurt, and I do miss three days of work, totally, no light duty, I’m just out for three days. When I come back on day four and I come back to light duty, because of that seven-day window, you still haven’t had lost time, so it’s still a medical-only claim.

Adam Cooper:

So just because I am curious now, some of those signs out front, you know, 500-something days without a lost time accident, even if somebody got injured and was out for three or four days, it’s still not lost time because the insurance company didn’t have to pay out?

Kenan Knight:

They’re still probably not counting that as lost time.

Adam Cooper:

Interesting, okay.

Kenan Knight:

And who knows, that factory, they may count any day off as lost time, but I guarantee most are counting that seven-day window or whatever it is in their state.  

So, kind of the third major piece to this is having a deductible on your workers compensation plan. In the state of Georgia, you can carry up to a $2,500 deductible on your workers compensation. Georgia is considered what’s a ‘net’ state when it comes to workers compensation deductible. Meaning, any claim you have is reduced by your deductible, and then it’s a net loss. For example, if I carry a $2,500 deductible and I have a $5,000 work comp claim, I have to pay my $2,500 deductible. The only thing that’s going to get reported to NCCI is the other $2,500 above my deductible.

Adam Cooper:

Is the deductible per claim, or per year?

Kenan Knight:

Per claim.

Adam Cooper:

So, if I have five different injuries in a year, I’m coming out of pocket $12,500 and whatever balance of each of those is gets reported.

Kenan Knight:

Correct. So, if I have a $2,500 deductible and I have a guy who cuts his hand, I send him to urgent care. They look at it, they stich him up, they give him an antibiotic and it’s $1,000. Work comp … You turn that into work comp, work comp handles it, they follow up with the guy and make sure his hand doesn’t get infected and all that. ‘Are you taking your antibiotic’, and make sure it doesn’t turn into something bigger. At the end of the day, it comes out to be a $1,000 claim. Your work comp carrier handles it all, and they pay the provider, they pay the doctor, but then they invoice you for the amount up to the deductible. So, it’s not like you have to handle the claim. Your work comp company still handles that claim, then they just invoice you for that $1,000.

Adam Cooper:

… And that doesn’t get reported back up to NCCI?

Kenan Knight:

Correct. So, you have to pay the $1,000 but it’s not counting against your mod. So, if you add all these up, let’s say you have a guy who gets hurt. The medical bills are $10,000. But, you have a Light Duty program, so you don’t have lost time paid, you don’t have the indemnity part paid, so it’s a medical-only and gets reduced by 70%. And then, that $10,000 in medical, you pay a $2,500 deductible, so it’s only $7,500 at the end of the day. That $7,500 is getting reduced by 70%. That $10,000 claim is almost nothing when it goes on your experience. As opposed to a guy who has no understanding of how any of this works. He thinks, ‘This is what I pay insurance for.’ He doesn’t have a Return-to-Work light duty, he doesn’t have a deductible, and he thinks he’s getting a good deal because he doesn’t have a deductible. People think of it like they do their personal health insurance. Like, ‘The lower the deductible the better.’ That’s short-term thinking on work comp.

So, the guy who doesn’t know how this works, his guy gets hurt. He sends him to the doctor, it $10,000. His guy says, ‘I can’t come back and pull wire, my shoulder is messed up.’ He’s out for three weeks while he’s going to physical therapy. The work comp carrier pays the medical, then they pay the indemnity, so the medical part doesn’t get reduced. Then, they have to pay the lost time, the indemnity, which is really how the claims balloon, how they get big. And then, he doesn’t have a deductible, so it doesn’t get reduced at all. So, the guy who knows what’s going on, what gets reported to NCCI might only be $750, it’s not going to affect them negatively at all probably, depending on how much payroll he has. The guy who has no clue how this works and just says ‘Hey whatever, just let the insurance company take care of it,’ that might be a $25,000 claim. And his mod is going to go up, and that claim stays with you on your NCCI mod calculation for three years. So, he’s going to be paying for that claim for three years in his work comp premiums.

Adam Cooper:

In a higher EMR?

Kenan Knight:

Yes, yes. So, it’s a compounding effect when it comes to this stuff. So, to what you’ve kind of started off, if I have five claims and I have a $2,500 deductible and let’s say they’re all $2,500 claims, I come out of pocket $12,000. But that’s $12,000 you’ve come out of pocket, and it’s over. If all those claims are hitting your mod and affecting it, you might be paying an additional $20,000 every year for three years. If you never gain an understanding, you may be paying an extra $25,000 on your work comp every year forever, just because you have claims and you don’t really understand how it works and you don’t have the controls in place.

Then it’s just luck. ‘Oh, I had a good year, good, my mod is going to drop a little bit next year. Oh, I had another bad year, my mod is going to go up.’ Most people think of it in terms of risk management, safety on the job. ‘Oh, we do what we can, we train our guys on ladder safety and all that.’ That’s great, and that’s a huge part of it, but there are also these technical things and understanding how it actually works that when you do have the claim - because you’re going to have a claim - if you’re a contractor, you’re going to have claims eventually. So, if you know how this works, you can mitigate it when it happens substantially.

Adam Cooper:

Do you find that most small to mid-sized contractors lack this understanding of how workers comp really works? They just think of it as something we have to have, like, ‘Just sign up, get us a workers comp policy and let’s get to work?’ Or, ‘We’re going to take the time to learn about this?’

Kenan Knight:

So … no, most small guys do not know how this works. And most bigger guys don’t know how it works. They may understand it a little bit, but they do not really understand it fully.

Adam Cooper:

Well, I know you’ve got to run, I know you’re on the move. Why don’t we wrap it up here, and thanks again for your time today.

- End of Video-

If you're ready to start working on your business, let's talk!

Ascent Consulting’s mission is to Build Better Construction Companies.

We are committed to delivering impressive results in the areas of 
profitability, performance, and growth.