The Effects of Workers’ Compensation Claims on Your Louisiana Based Business
January 17, 2022
Workers’ compensation is insurance that helps protect your Louisiana business and employees in case there is a work-related injury or illness. It’ll pay for medical and healthcare costs for the injured employee and partially compensate the employee for lost wages. However, since larger companies have deeper pockets and payrolls to absorb direct and indirect costs, smaller companies tend to feel the impact of workers’ compensation more.
For most businesses, the only direct cost to your business is the workers’ compensation premium. This is the premium you pay for insurance coverage and in return the insurance company pays out benefits for injured employees that are eligible under state law. The insurance company will also pay legal fees for covered claims. But the direct cost of workers’ compensation insurance is not the only cost a business will face. There are many indirect costs a business will incur and should be aware of.
The biggest immediate effect your business will incur is the added administrative costs since your business is guaranteed to have more paperwork to process when a claim is made. When an incident occurs, you must provide the worker with a claims form and submit a First Report of Injury form to your insurance company. This is just the beginning, as workers’ comp claims take significant time to process. You’ll also need to review any evidence related to the incident with your insurance company. All these tasks and more take up a ton of time for you and your staff.
Higher Payroll Costs
While workers’ compensation benefits can help offset some of the lost wages for a worker, you could still owe that employee the difference that is not covered. Plus, while an injured employee is unable to work, many times you’ll need to hire an additional employee to perform their job. Or you’ll have to pay overtime to other employees to make up the slack. That’s why it is generally best practice to bring back an injured employee as soon as possible even if it’s in a reduced capacity.
If a claim against your company is illegitimate, you might decide to fight the case in court. Your attorney will be able to advise you on the pros and cons of this approach, but many times you’ll end up paying much more in legal costs by challenging a claim as opposed to settling. Keep in mind that according to Lockton Analytics and Rubens Kress & Mulholland, only 7% of workers’ comp claims are denied and only 5% go to trial.
The impact to your company’s brand and goodwill is hard to predict but is often tied to the severity and frequency of incidents. Will the local news pick up the story or will it spread like wildfire on social media? This can cause damage to your reputation among customers, potential customers, and the boarder community. High-profile incidents, frequent incidents, and OSHA fines can also make it hard to hire and retain employees.
The best way to minimize the costs of workers’ compensation is to limit the chance of an incident to begin with. By taking a proactive approach to employee health and safety, you can help reduce the frequency and severity of incidents at the workplace. If your Louisiana business needs help evaluating its workers’ compensation insurance needs, please give us a call or use our contact form to get in touch. Our insurance experts are ready to help!