Plans to prevent injury, illness help keep costs down
By TIM HEARDEN
REDDING, Calif. -- Keeping workers' compensation insurance premiums down requires farmers to take a two-pronged approach, industry and university experts say.
The first is to make safety a priority for the operation, maintaining a proper injury and illness prevention plan and holding regular meetings with employees about preventive measures.
The other is to shop around for rates and make use of credits and discounts made available by insurance companies, said Amjad Ramahi, a research assistant for the University of California-Davis.
Agricultural businesses aren't always as keen on taking safety precautions as warehouses, manufacturers or construction companies, said Rick Alvord, assistant loss control manager for the State Fund office here.
"With farms, you get more of a family environment," Alvord said. He recalled speaking at an FFA workshop to students who had reported being involved in all-terrain vehicle accidents on their land and found that many weren't wearing helmets.
"There's a lot of practices like that," he said.
The controlling factor in a business' premiums is a number called the experience modification, or "ex mod" as it's called in the industry, said Ramahi, a former insurance safety and health consultant for Zenith Insurance Co.
The number is a comparison between an operation's history with injuries and the average for its specific industry. A 100 rating means a business has an injury rate that is average, Ramahi said.
"If you're at 200, you're twice as risky as the average farmer in the industry," he said. By the same token, a farm with a rating lower than 100 is safer than the average.
"If they're at 75, that factor alone saves them 25 percent on their expected cost of workers' comp," Ramahi said.
If an operation's experience modification goes up, the higher number will be on record for three years, and if there are no more illnesses or injuries during that period, it will go down, said Rod Teeter, senior Farm Bureau group consultant for State Fund, a government-established California insurer.
The person in charge of a farm's safety program should be aware of what its experience modification is and work on stopping practices that may have caused it to go up, Teeter said.
"You have to really look at each part of your operation -- do an analysis of where injuries have been coming from and what you can do to put in safety steps to keep it from happening again, or keep its severity from happening again," he said.
The most common hazard Teeter has seen on farms is a lack of communication among employees and managers, especially where language barriers exist, he said.
Others include a lack of training on equipment or a lack of maintenance, such as having safety guards missing from tractor engines. Also, required preventive equipment such as safety glasses, gloves or respiratory equipment aren't always provided or enforced, he said.
"Having front-line, first-level supervision on a farm or ranch is one of the key issues that come right down to safety," Teeter said. "If they're not enforcing or leading by example ... the employees will never use (safety equipment) if they can get away with not using it."
Teeter urges safety monitors to address issues when there's a near-miss instead of waiting for an injury to occur.
"Typically when someone is almost injured, it's going to happen over and over again until you correct it," he said.
After an injury, it pays to have a good relationship with a medical provider, Teeter said, adding that minor injuries such as cuts and abrasions that require a single doctor visit don't have to go through the workers' comp system.
"If you have a number of small claims, it's worse than having one large claim," he said. Also, having a severely injured worker return on a modified or reduced basis until he or she is ready for regular duties can lessen the amount of the claim, he said.
When it comes to shopping for the best rates, a grower should work with an independent agent with a knowledge of agriculture, or even an awareness of issues specific to a certain commodity, Ramahi said.
An agent has a great deal of influence with a company and can negotiate for credits and discounts, even if a policyholder has a higher experience modification, he said. Sometimes companies offer special groups or programs for specific industries, he said. Credits could amount to as much as 40 percent of the premium, he said.
A farmer or rancher should make sure the agent is actually shopping around, not just pretending to, he said. Professional organizations are usually good places to look for agents, who could still be effective representatives even if they live outside a farmer's area, Ramahi said.
Farmers should make themselves available for on-site inspections by insurers and make use of the advice they receive, he said.
"What's at risk here is if you as a farmer decide to close your doors and say 'No, I don't have time,' then what you're risking is ... not getting an option of renewal," Ramahi said. "That could be devastating because you'd have to switch to another insurance company and pay fees. You may be stuck with a higher rate.
"Another thing that could happen is even if a company renews, they'll take any credits they gave or give you no credits at all," he said. "You could face cancellation of your policy if you're suspected of hiding something."
Another option for a grower with a high experience modification is to "transfer the risk to somebody else" by hiring an outside labor contractor to manage employees, Ramahi said. That involves actually laying off your employees and having the contractor hire them, he said. The farmer provides the money for the payroll as well as for the contractor's services.
"It's a way to control your risk if it's out of control," Ramahi said. "I've seen 400 percent experience modifications. Imagine being able to pay $100,000 versus $400,000 in a year."
While it's best to shop around, farmers should be aware that low rates may be too good to be true, Ramahi said. Some companies that have tried to undercut their competitors have ended up losing money and going out of business, he said.
The bottom line, he said, is there's no substitute for safety.
"I think at the end, the best advice to give to a grower is don't be at the mercy of experience modification," he said. "Do what's right and treat people as if they're family. If you saw your son doing something hazardous, you'd stop him. You should do the same for your employees.
"It's not in the hands of the insurance company," he said. "It's in your hands."