Improving Workers' Compensation Management in Construction

Abstract

Workers' compensation is one of the most pressing problem areas in the construction industry. The industry, due to the nature of work involved and the demand for safety, is constantly challenged to improve its management of workers' compensation. The current costs of coverage and administration are often thought to be excessive in the industry, while the protection and benefits provided to employees are sometimes perceived as unsatisfactory. This paper was developed from the findings of a Construction Industry Institute (CII) research project that was conducted to identify improved methods of management by contractors for their in-house workers' compensation insurance program. The team members from industry had more than 200 years of experience in construction safety and insurance management with construction organizations. In addition to the expertise of the team members, guidance was also sought from other contractors and the insurance profession. A major finding of the research was that many contractors do not take an active role in workers' compensation management; therefore, this paper presents the research team's major suggestions for contractors to improve their workers' compensation management program. Some means of reducing the costs of workers' compensation insurance while improving the system are given with an estimate of potential cost savings. Cost savings are primarily derived from lower premiums due to the reduction in a contractor's experience modification rate (EMR). Therefore, some discussion of the EMR is provided with an evaluation of its validity as a measure of a contractor's safety performance.