Losses of productivity and high insurance premiums aren’t the only repercussions of a workers compensation claim. If your indirect costs exceed your direct costs, you could end up paying huge out-of-pocket fees. “You’ve got to understand the financial impact of one claim and how it affects the profitability of your company,” explains Bruce Eades of Insurance Office of America.

In his presentation at NATE UNITE 2014, Bruce discussed an actual case study from a company where they incurred $83,000 in direct costs and $93,000 in indirect costs, which their insurance polices did not cover. Direct costs include your premiums, deductibles, medical bills, training, safety equipment, and safety director; whereas, your indirect costs include things such as the increase in insurance premiums, experience modification increase, loss of production, legal feels, clean-up costs, overtime, additional administration fees, training new employees, repair and replacement of damaged material or equipment, and much more.

Bruce illustrated with a real example of what the cost was for an actual company with a workers compensation claim. “Mitchem has a $9,855 workers compensation claim. This one claim drove it’s experience modification up 6.4%. The financial impact is this: when it hit the experience modification the following year, indirect costs increased $4,693. It’s like a DUI—it’s not going away. Over three years, that claim has cost the company over $14,000.”

Workers compensation accidents and claims also affect your productivity levels, which is why safety training and proper equipment are extremely important. “When someone gets a cut on his or her finger, what happens? It can shut the whole job site down for the rest of the day. You have to take the worker for quick or emergency care , and the, you then have to pay time and a half to get the job going,” Bruce explains. It’s a costly proposition that can be avoided by careful, proactive risk management. That’s where having a industry expert who understands not only mitigation of the risks unique to your business, but also has the insurance  knowledge and carrier relationships necessary to secure the best protection possible.