Holmes Murphy uses ISU research to help lower workers’ comp costs
BPC Staff Jun 27, 2016 | 3:42 pm
<1 min read time
0 wordsAll Latest News, Business Record Insider, InsuranceHolmes Murphy & Associates is using some heavy-duty statistical research conducted by an Iowa State University professor to help its largest clients reduce their workers’ compensation insurance costs.
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Kip Augspurger |
Iowa companies spend $749 million each year on workers’ compensation insurance premiums. A study conducted by ISU statistics professor Cindy Yu found that paying more attention to particular key performance indicators related to employee safety can save companies money by reducing their workers’ comp risk.
The study identified specific behaviors, including how decisions are made, how change is implemented and the frequency of discussion of risk, to determine the effects on financial outcomes.
“In assessing the best practices of our largest customers, we found certain behaviors have a statistically significant impact on how much clients spend on insurance,” said Kip Augspurger, Holmes Murphy senior vice president. “Our unique process is about helping businesses turn safety from a cost of doing business to long-term shareholder value.”
For the past 30 months, Holmes Murphy has been working with about 200 large clients to analyze 31 key performance indicators, or KPIs. A Holmes Murphy professional with a good working knowledge of the client then assesses each KPI on a scale from “nothing in place” to “none better.”
For example, one KPI is near-miss awareness, looking at how well the company responds to safety incidents that didn’t result in injuries or damages. Another KPI, event learning, evaluates how well the client investigates safety incidents for their causes and whether corrective action is taken.
Cumulatively, the study used those scores to place each company as a dot on a scatter chart showing how much they are above or below the 1.0 average “Mod” — the factor by which a standard workers’ compensation premium is multiplied to reflect an insured’s actual loss experience. For every 10 percent that companies improved their average Mod, they can expect to see an average 4 percent reduction in their workers’ comp premium, the study found.
That average savings can vary by quite a bit, the study found. “Statistically, we are 95 percent confident the reduction in Mod will be at least 1.3 percent and could be as much as 6.8 percent,” Yu concluded in the study.
Because the modifications recommended are generally behavioral in nature, the return on investment tends to be high, Augspurger said. “Our measurements aren’t looking at replacing people with machines. It’s about, how can someone do the job better, safer and faster?”
Augspurger said Holmes Murphy’s next step is to calculate the actual savings it has provided for its clients using this method, which it offers as a no-fee value-added service to most of its large clients.
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