First Six Months of 2023

June 30 – a good time to review our results and see if we are on target or if we need to make adjustments to reach the company goals. An important part of that review is a study of claims losses. Insurance claims are the primary driver of financial results. No other expense category comes close to the percentage impact of claims loss payouts.

Our June 30 review looked at the first six months of 2022 and compared it with the current six months of 2023. We will want to review the differences and see if there are any trends that can be identified. In looking at the aggregate loss payments for 2023, we found those were higher than both 2022 and 2021. We pulled 2021 into the review to see if any trend lines could be identified. Interestingly, we found the claims frequency has remained virtually unchanged for 2023 compared to 2022. The frequency difference was 1%.

After finding the no change on frequency, the next review step was to evaluate severity. If the total claims costs are higher but the item count remains the same, then severity has gone up. In our case the severity change from 2023 over 2022 is +19% higher. Once we know that we have a severity item to address, we then delve deeper into the numbers and look for common drivers for the severity increase. Are there any traits such as time of day, days of the week, department of the company – anything that might be beneficial in the severity analysis. A theme did emerge in the larger claims’ report – new employees. At MTM we define new employees as employees who have been on the job 90 days or less. When looking at the accident reports for these claims, common phrases written by the shop staff are “new employee”, “training did not occur”, “training was minimal”, “employee did not know shop rules”, “shop regulations were not followed”.

With the shortage of workers, it is no surprise that getting new employees is a significant challenge for our member shops. My job is to share this review with you, so you know of the impact. What may not be as obvious is the cost of these new employee losses. An account’s experience mod is based on their individual losses compared to an expected loss for the payroll and class code at each shop. When losses occur, the experience mod goes up and then is multiplied by a manual rate to do a premium calculation for each member. The more losses, the higher the experience mod. At MTM we have an extremely high mod of 3.06 and the lowest mod of being .49. That means the shop at the high end is paying premium six times higher than the shop at the lowest level. Paid losses for any reason impact the experience mod and are harmful to the financial condition of our shops. This is why we have such an emphasis on Loss Control.

When I visit shops, one of the best statements I hear from shop owners and safety managers is, “I have a personal responsibility to keep my employees safe and return them at the end of the day in the same condition as when they arrived in the morning.” That is good advice for keeping a shop focused on production versus on injuries and employees who often rush to help an injured worker, but it is also a good financial move since your experience modification will go up and your company dividend will go down based on loss expenses.

In these hectic times we know it is difficult to focus on training. It is also difficult to have the shop distracted with a serious injury. There are expenses that occur when a serious injury happens that are not reimbursable by a Workers’ Compensation policy. I hope this brief review provides you more reasons to keep your shop safe for both new and old employees. Until next time, John.