Strategies for Construction Contractors to Reduce Workers' Compensation Costs

Abstract

Workers' compensation insurance (WCI) premiums for construction companies are higher than those for most other industries. WCI is increasingly affecting contractors' ability to conduct business and has already made the costs of performing certain types of work in certain states prohibitively expensive. However, there are a number of strategies construction companies can employ to lower their WCI costs. These include the formation of industry groups, safety programs and lobbying for legislative reform. Groups of like–minded employers pool risk and provide better credit worthiness to potential insurers. Insurers in return are able to reduce marketing costs as well as claims processing and safety costs. An effective safety program can also greatly reduce workplace injuries. Multidepartmental and multilevel teams with the support of top management can help establish, implement, and continuously improve safety programs. Along with voluntary measures that an employer can take, it is essential that employers encourage their legislators to cure the workers' compensation system. In states where legislative reform has taken place, losses and premiums have declined significantly. The writers hope that this paper will encourage construction companies to better understand the control they have over their own WCI costs and the benefits of improving their own safety performance.