Safety pays
Sunday, January 7, 2007

By Jeff DeMoss
Standard-Examiner staff
jdemoss@standard.net

CLEARFIELD -- At Futura Industries, employees are required to go through a routine before each shift that includes specially designed stretches and discussions about ways to minimize hazards at the aluminum extrusion plant, where metal is heated to 1,000 degrees and pressed by machines at up to 190,000 pounds per square inch.

Despite the potential dangers associated with the work it performs, Futura has gained a reputation as one of Utah's safest places to work. It also earned a top safety award from the Utah Occupational Safety and Health office in 2006.

Company President Susan Johnson, who has led Futura for 12 years, believes workplace safety and business success are inseparable.

"A clean plant is a safe plant, a safe plant is a productive plant, and a productive plant is a profitable plant," Johnson said. "There's a huge link between safety and doing all else well."

A safe working environment can also have a positive impact on a company's bottom line by keeping down costs for workers' compensation insurance.

After several consecutive years of increases, thousands of Utah employers are expecting to pay lower premiums this year for workers' comp, which pays wages and medical bills to employees who are unable to fulfill their job duties because of a work-related injury or illness.

Murray-based Workers Compensation Fund, which provides the insurance to about 60 percent of Utah companies, is reducing its overall basic premiums for 2007 by 6 percent based on recommendations from the Utah Insurance Department.

WCF President and Chief Executive Lane Summerhays said the decision to reduce premiums was driven by fewer work accidents and higher-than-expected revenue from employment growth and investments.

"We had originally targeted a 4 percent increase," Summerhays said, "but because of the growth in the economy, the number of employees expanded dramatically from what we anticipated in the budget. At the same time, the number of accidents is the lowest we've seen in several years."

Annual rate changes are determined based on companies' records of serious on-the-job accidents. Those that show improvement over a period of three consecutive years or longer are generally rewarded with lower premiums.

Companies and industries also receive good marks for implementing formal safety training and programs, thorough investigation and prompt reporting of work accidents, drug-testing policies, and return-to-work programs for injured employees.

Actual changes in premiums vary among individual employers and the approximately 700 different job codes served by workers' comp providers. For example, while WCF is lowering its base rates 12.8 percent for long-haul trucking companies, its rates for excavation companies are rising 10.4 percent.

WCF was created in 1917 as a state entity, but has operated as an independent insurance carrier since the late 1980s. The company is owned by its policyholders, who pay its revenue in the form of premiums. It also earns income from investments in stocks and treasury bonds.

As a quasi-public entity, WCF operates under a mandate to serve high-risk companies and all others who cannot obtain workers' comp coverage through other providers. It return, it is exempt from federal income taxes.

"Take an explosives manufacturer," Summerhays said. "No one else will insure them, so we do. Then, we compete with the other providers for the good business."

He said WCF's revenue was up more than 16 percent to a record $295 million in 2006. The company has returned $42 million to policyholders in the form of two dividends, the first time it has declared more than one dividend in a single year.

Utah workers' comp providers are required to send their claims data to the National Council on Compensation Insurance, which calculates a "loss cost" figure based on the data. Carriers use that figure to develop their own rates each year.

"We're seeing a decrease this year because that loss cost multiplier has gone down," said Brad Tibbitts, director of the Utah Insurance Department's life, property and casualty division. Natural competition in the marketplace helps keep prices in check, he said.

WCF's current rate decrease comes after an overall increase of 65 percent to 70 percent over the last six years, Summerhays said.

He attributed the reversal to several factors, including a new safety-oriented advertising campaign, increased efforts to reach Spanish-speaking employers and a low unemployment rate, which gives companies an extra incentive to keep existing employees healthy because new workers are hard to find.

Also, 2006 "was just a lucky year" in terms of fewer serious workplace accidents, he said.

"It's kind of like hurricane season," he said. "2005 was a bad one, but 2006 was a good one."

Companies with the fewest and least expensive workers' comp claims are big income sources for insurers, and help lower premiums for other employers.

Johnson of Futura said that, over the past three years, the company has paid about $320,000 in workers' comp premiums, while paid claims for its employees have totaled less than $14,000.

"We're actually getting a decrease of $25,000 to $30,000 in premiums this year, but it's still highway robbery," she said.

Statewide, providers of workers' comp insurance earned a record-high $413.4 million in premiums in 2005, up more than 65 percent from 2002, according to the insurance department.

The state does not report how much was paid out in total claims during that period.

Tibbitts said that while many employers will still feel they are paying too much for the insurance, overall rates are an accurate reflection of risk and demand in the market, and Utah is in better shape than most states.

"Costs keep going up, but other than South Dakota, Utah has the second-lowest rates in the country."

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