By Lukas Gleason and Mike Gong
With today’s competitive business environment, self-storage owners are relentlessly looking for ways to shrink their expenses and grow their bottom line. What can be trimmed? What can be streamlined? Ultimately, what costs are expendable? Although it may be tempting, the next time you take a look at your expenditures, try not to visualize workers’ compensation insurance coverage as an expense. Instead, consider the value it brings.
Any business owner who’s dealt with a workers’ comp claim can attest to how rapidly the charges rack up. When an incident occurs, those with a workers’ comp policy stand under an umbrella of relief, while their counterparts scramble to keep out of the rain. Medical care, rehabilitation treatment and lost wages are all covered by this insurance. Employee health is a daily risk, and you, as the employer, are held responsible for workers who get hurt or ill while on the clock. Here’s a look at the costs and unique challenges of this coverage, and how to choose the right carrier.
Cost
How much will a policy cost? Premiums are calculated by multiplying a rate per hundred against your payroll. So naturally, the higher the payroll, the higher your exposure, and the greater premium you’ll pay.
The second half of the equation—the rate—varies by state and employee classification. The typical premium-rate range for self-storage classifications in various states is $2 to $10 per hundred of payroll depending on the state. Rates may also vary depending on other factors such as number of years in business, loss history and other credit aspects. Understanding the calculation behind workers’ comp will allow you to properly communicate your concerns with your broker upon renewal.
Challenges
Some challenges unique to self-storage are often associated with safety protocol. The remote nature of some facilities can increase the chance of failed safety practices. It can be difficult to recognize lapses when the business owner isn’t on site. In contrast, for businesses in which all staff members work at one site or a headquarters, management can easily recognize and correct a problem immediately.
While completely eliminating the risk of broken safety protocols is impossible, there are ways you can mitigate it. Examples might include mandatory safety training, including education on proper form and equipment operation. Many insurance carriers offer safety-training programs you can take advantage of to better educate your staff. It’s the job of the carrier and you as the business owner to make a joint effort in making employees aware of procedures. A proactive and constant reminder of a safe work environment starts at the top.
Carrier Selection
So, how do you and your insurance broker decide on a carrier? While price is important, there’s much more to the decision. Here are important things to consider:
What’s the carrier’s financial solvency? Many carriers are rated by independent agencies that review their financial strength at least annually. The most common rating-review agencies for the insurance world are A.M. Best Co. and S&P Global Ratings. A low premium is irrelevant if you file a claim and the carrier doesn’t have the financial strength to pay for it.
How long has the carrier been in business? Longevity is a great indicator of a carrier’s ability to properly rate for risk. If the premium rates being charged are too low, the carrier won’t be able to sustain itself to pay for claims. If the rates are too high, it won’t be able to generate the necessary volume to run a successful insurance program. Longevity will prove a carrier’s ability to properly rate risk.
Does the carrier work with many lines of insurance or only workers’ comp? With all other factors remaining constant, when faced with the option of selecting a generalist or a specialist, we’ll take the specialist every time. In our experience, specialists respond more quickly and are generally more efficient because they don’t have any other lines of insurance clogging traffic and competing for attention. Response time is a great transition into our next concern.
How does the carrier handle claims? Adjuster responsiveness is crucial in mitigating claims. We like to consider carriers that employ a caseload ceiling for their adjusters. An adjuster who’s constantly being bombarded with new cases won’t have the best chance at a proper response time. Carriers can limit this influx to a certain amount of claims per adjuster. This provides the adjuster with a reasonable workload and gives him the best opportunity for an appropriate response time.
What are the safety and risk controls? Many carriers offer services to mitigate risky activity that could give rise to a workers’ comp claim. They’re more than willing to do their part in educating your employees. Don’t forget, insurance companies want to avoid claims just as much as you do!
We love to consider carriers that have the ability to create modified work programs to get employees back to work. These may include duties the doctor has approved for an employee. The tasks might not be what the employee did before his injury, but this approach helps close cases, reducing your workers’ comp costs.
This is a general overview of items providers see day in and day out while insuring self-storage properties. Hopefully, it demonstrates the real value of workers’ compensation coverage. Without a policy, the costs of an everyday occurrence can turn into a catastrophic loss, wrecking your hard-earned profit. The next time you take a look at your balance sheet, don’t look at workers’ comp as an expense, but rather for the value it brings.
Luke Gleason and Mike Gong are property- and casualty-insurance professionals for Arthur J. Gallagher Risk Management Services. Since 1990, the company has provided a full range of insurance solutions to the self-storage industry. Gallagher is one of the largest insurance brokers in the world, with more than 250 offices throughout the United States. For more information, call 800.568.0833; e-mail [email protected]; visit www.ajg.com.
