During these unprecedented and trying times, employers of all sizes are facing very unique challenges. One question we find ourselves answering on a consistent basis is what happens when an employee is exposed at work. This sparked us to reach out to Jeff Cruz and Jon McPheters from HUB International. Jeff and Jon have nearly 50 years of combined experience in workers’ compensation and have definitely been making an impact and exemplifying excellence to the employers they serve. Thank you, gentlemen, for spending time answering our questions. We hope everyone enjoys this week’s interview!
WP. Hello Gentlemen! Please give us a quick summary of your backgrounds.
JC.I actually started as a Claims Adjuster nearly 30 years ago. From there I eventually became a Claims Manager then a Client Liaison – all on the carrier side. Around 17 years ago I joined the brokerage world as a Workers’ Compensation Claims Consultant and for the past 8 years, I have been an Account Executive. In my current role, I provide risk management consultative services and insurance placement across a variety of coverage lines, but my specialty continues to be workers’ compensation.
JM. I began my career as a Workers’ Compensation Claims Adjuster almost 20 years ago. I then moved on to work for a broker as a Workers’ Compensation Claims Consultant and transitioned to become the Risk Manager of a large multi-state company. I eventually transitioned back to the broker side, where I have worked as an Account Executive/Workers Compensation Claims Advisor for the past 5 years. In this role, I provide claims advocacy and assist with reviewing my clients overall risk management program. I am one of the few in the insurance industry that has worked on all three sides of the business (carrier | brokerage | employer). This allows me to really help my clients navigate the constantly evolving insurance world.
WP. You have managed and mitigated workers’ compensation losses and the cost of this coverage for many industries in your careers. Have you noticed significant differences in your approach to prevention?
JC. The foundation for identifying claim frequency and severity is basically the same. There are six key performance indicators (KPI’s) we evaluate across all industries. From there, we drill down to industry specifics based on benchmark data to develop a client-specific risk management program. The final product is one designed specifically for the client within that client’s industry. We have experienced great success in reducing claim frequency, severity, litigation and lost days using this approach.
JM. I know we both agree that prevention of losses is crucial, but the way we approach this will likely be different. We share the same end goals, but just take different routes to get there. I like to meet with my clients in person to not only see their workspace, but to get a better understanding of their culture, and learn about past history. This helps me to determine what may be the best way to prevent claims from occurring in the first place. For some companies, implementing and updating standard safety protocols and procedures is the best process. For others, it could be onsite training or webinars that prove to be most effective. There are many different options, but there is no standard cookie-cutter approach. Providing options and collaborating with my clients during this process is key to preventing claims.
WP. How is the COVID-19 crisis affecting workers’ compensation claims?
JC. Like the common cold or flu, COVID-19 is currently being considered another airborne illness. Though we cannot speak to what each carrier will do when these claims are submitted, it is generally believed the claims will not be considered compensable. Some possible exceptions are employees engaged in work which places them at higher risk of contracting the virus than the general public. Examples of this are healthcare workers, first responders, some lab technicians and employees required to travel abroad. If an employee makes a claim for Coronavirus, we recommend having a discussion with your broker and insurance carrier to determine the best course of action. There are several pending legislative initiatives regarding COVID-19 and how we approach insurance claims, not just workers’ compensation. It is difficult to stay current with the vast amount of information so HUB has developed a COVID-19 Resource Center which provides daily updates for employers. The link is provided below:
WP. What is the most common misconception regarding workers’ compensation?
JC. I believe too much focus is placed on the experience modifier (Ex-Mod) as an indication of a client’s claim performance. The Ex-Mod is really a benchmark based on just three years of data. The final published Ex-Mod is also a factor of mathematical manipulation that has nothing to do with a client’s actual losses. Such as changes in the expected loss rates as set by the Workers’ Compensation Insurance Rating Bureau. I think the Ex-Mod is a good tool to get an idea of claim performance, but in order to truly understand the loss landscape, a much deeper dive is required. Properly established loss control and risk management measures should be the primary focus, not the Ex-Mod.
JM. Some employees feel they are going to win the lottery as a result of being injured. Employees have to remember that the system was created to provide replacement wages while they are off work, medical treatment to assist in their recovery, permanent disability monies to pay for their injuries, and a retraining program should they not be able to go back to their old job duties as a result of the injury. There is no pain and suffering in the workers’ compensation system.
WP. What is one of the most impactful decisions in controlling costs a company can make and why?
JC. Know your losses and be proactive in your approach to claim prevention. The best claim is the one avoided. Understanding potential risks and correcting those risks prior to an injury is key to controlling costs, however, there is a reason we call them accidents. Those accidents can tell the story of how to avoid future injuries so understanding your current claims and managing them through closure is also key.
JM. Once a claim happens, getting the employee back to work in some sort of modified duty can really help control the cost of the claim. Temporary disability, on an average lost-time claim, is about 35-40% of the total cost. Determining if you can bring an employee back to work decreases the amount of temporary disability spent by the carrier, which also decreases the loss ratio for the carrier. This may also create a company culture that proves there is no incentive to filing frivolous claims as modified duties are available. Finally, having open communication with the medical provider and claims adjuster is very important to help further control these costs.
WP. What does the future of workers’ compensation look like in California?
JC. Ever-changing. Each year we are faced with new legislation and case law which often changes the way we approach claims management. It is important to remain current with legislative changes in order to avoid any potential pitfalls and also take advantage of laws which provide favorable outcomes. With regard to premium, California has enjoyed declining rates since 2014 and the average cost of an indemnity claim has been relatively stable during this time. The one indication of potential rate increases is the carrier combined ratio, which has been slowly increasing over the past three years. I believe employers will enjoy the lower and/or declining rates for a year or two before we start to see increases again.
JM. The workers’ compensation system is constantly changing. AB5 and the Dynamex ruling are recent changes that have a significant impact on California employers. As Jeff stated, workers’ compensation rates have continued to decline over the past five years and I also expect that rates will rise in the near future. I believe employers should expect to see increases to workers’ compensation premiums in the next year. Anything that employers can do now to prevent claims and close open claims, may help to minimize the increase when it occurs.
WP. Thank you for your time, gentlemen. In closing how do you keep a healthy work-life balance?
JM. Given the nature of my work, it is important for me to be available for my clients at all times. It is something I truly enjoy and it helps me to develop very good relationships. Another positive facet of my job is it affords me the opportunity to have flexible hours which gives me the ability to spend quality time with my family and occasionally get to the gym. Satisfied clients and a happy home are my barometers for a healthy work-life balance.
JM. I also really enjoy the flexibility this job provides and being available to my clients when they need me is necessary, however, I make sure I spend time with my family. I enjoy going to the beach, family game night, being a dance/cheer dad and coach for one of my kid’s soccer teams. My life requires a balancing act, but ensures that both my clients, friends and family are taken care of. I would not have it any other way.
Jeff Cruz, MBA, CPCU
HUB International Insurance Services Inc
Jon McPheters, ARM
HUB International Insurance Services Inc