Safety Accountability – “Insurance Chargeback Programs”

January 6, 2015 No Comments

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Safety Accountability – “Insurance Chargeback Programs”

A key to any injury and illness prevention program is accountability.  It is through accountability that management motivates employees and gets things done.  

If you work for a company that has multiple locations and you are not charging back insurance related costs to each location you are missing out on a significant opportunity to incentivize your branch managers.

An insurance chargeback program will recognize and rewarded locations with few accidents, and will penalize locations who have too many accidents.  They are especially effective at larger, multi-location companies that are either self-insured or have a deductible program.  

Below is an actual insurance chargeback program that was developed at a multi-location company that I worked with –

Mission

In keeping with our corporate philosophy of local fiscal responsibility, an insurance charge-back program has been developed to ensure branches with poor insurance records pay for their own accidents, and conversely, locations/branches with good records pay less for insurance. 

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Insurance Costs To Be Charged Back

• Actual premiums paid to the insurance companies for workers compensation and auto liability insurance
• Payments to third-party claims administrators/adjusters
• The self insured cost of claims that the Company will have to pay directly.  We will include all dollars  (paid and reserved) in the calculations

Preliminary Chargebacks

During the first two months of every quarter, the insurance costs (described above) are allocated to branches based on their head count (for worker comp) and number of vehicles (for auto liability)

Final Chargebacks

At the end of each quarter all major claims over $1,000 and under $50,000 will be charged to the specific branch that incurred the claim, and the other branches will have their preliminary charge back reduced proportionally.  We will include all dollars  (paid and reserved) in the calculations.   Also, we will include all costs associated with adjusting/handling that claim.

What Happens With Claims Over $50,000? 

Insurance programs are established to protect from catastrophic loss.  Once a claim exceeds $50,000, then the first $50,000 will be charged to the offending branch and the remainder of the cost of the claim will be borne by all branches in the Company proportionately (see preliminary charge-back section above).

Appendix

Actual chargeback calculations will always be done two months in arrears.   The reason for this delay is that the claim adjusters need this time to investigate claims and to establish realistic reserves.

The basis for the chargeback will be the insurance company’s claim loss reports.  Only the CFO will be empowered to adjust an internal charge-back amount after it is announced.

After the quarterly chargeback is calculated, the location/branch will never again be charged for those claims (even if the incurred amount on a claim changes in the future).

Please note that the above chargeback program is only being shown as an example, not as a template for you to adopt.  Any insurance chargeback program that you establish for your company will need to be tailored to your particular insurance program and management system.  

If you’d like to see another example of an Insurance Chargeback Program, click here to view Safeway’s program.

This is our first in a series of three articles on accountability.   Click here to view the second accountability article on “Personal Safety Scorecards”.

Programs, Safety Articles