Contractor Planning Tool
Control Insurance Costs
Soft tissue injuries are expensive, with major immediate and long-term impacts to businesses and their employees.
The cost to a contractor of just one injury can be significant. Consider the following example and then ask your insurance broker what one claim could mean for your business* (1):
Your Starting Point:
- Base premium = $160,000
- Claim free experience modification rate = 66%
- Workers’ compensation premium = $105,600
After one injury claim of $50,000 in direct costs (workers’ compensation payments, medical expenses, etc.), your:
- Experience modification rate increases by 15 points
- Insurance premium increases by $24,000 to $129,600 a year (or $72,000 for the 3 years the higher modification rate is in effect)
- Indirect costs (wages not covered by Workers’ Comp, accident investigation, training replacement workers, etc.) may reach an estimated $55,000
- Total cost of the claim = $127,000 ($72,000 + $55,000)
What does that added cost mean for your bottom line? If you have a 5% profit margin, you will need to generate an additional $2,540,000 in business to cover the cost of this injury.
The figures in this example are for illustrative purposes only. The costs associated with a soft tissue injury will vary.
Remember — “Experience modifications are based on your last four years of experience, excluding the current year. For example, if you renew on January 1, 2014, the experience from January 1, 2010, thru December 31, 2012, will be used in the calculation.” (2)
Other Potential Costs
Highly addictive opioids are commonly prescribed to construction workers to treat pain caused by soft tissue and other occupational injuries, and can lead to substance use disorders.(3) These disorders create other costs for employers due to lost work time, employee turnover, additional training needs, and increased demand for healthcare. The added costs are particularly high in the construction industry, as shown in the following table.
Estimated Annual Substance Use Cost for Employers with 100 Employees in Different Industries for Missouri (4)
- Cavignac, J., Dickerson, M. “The REAL Cost of a Workers’ Compensation Claim.” Cavignac & Associates Insurance Brokers (2013).The article references a 10% profit margin and the related business that would need to be generated. We have adjusted the figures to reflect a profit margin more typical for a smaller employer.
- Cavignac, J., “Commercial Insurance Update – Understanding Your Experience Modification: What You Need to Know” Cavignac & Associates Insurance Brokers (2005).
- CPWR Resources to Prevent Opioids
- NSC Substance Use Employer Calculator