Safeguarding Success: Advanced Workers' Comp Tactics with Kevin Ring

What workers' compensation does, which is pay for employee injuries when someone gets injured at work. And so there's a tremendous amount of information out there and your insurance company also has resources about keeping your business safe, which is an incredibly broad topic and pretty specific to whatever industry you're in, but it's traditional safety has been an amazing thing. And if you look at statistics going back 50, 60, 70 years, it is mind-blowing how far down the injury rate has dropped compared to decades ago. Welcome to super entrepreneurs podcast. I'm your host Shahid Durrani. Today we have with us Kevin Ring. Kevin is the lead workers' compensation analyst at the Institute of Workers' Comp Professionals, IWCP, which trains both insurance agents and employers in how to build a successful workers' comp program. Welcome to our show, Kevin. It's great to be here. Shahid, it's going to be a fun conversation. Oh, for sure. Can you start off by sharing? Was this a childhood dream to get into this line of work or was it some kind of life events that got you into it? Like a lot of people in the insurance industry, I fell into it. So my background going back over 20 years now, I was actually in IT. I was born in the seventies, came of age in the eighties and nineties and got very into computers when I was a kid. And I was very fortunate that my parents were able to get a PC for the house when I was probably in fourth or fifth grade and just learned to love tinkering with that stuff, which eventually turned into a career. But then I met my, my wife and her dad has, I like to say that he sold George Washington, his first homeowner's policy. That's how long he's been in the insurance business. And in 2001, he and a business partner started the Institute. And in late 2002, the business was growing. And as many entrepreneurs have experienced, you got to the point where running the business off of a spreadsheet was not, was not going to work. So they came to me and they said, how would you feel about coming to work for us? And, and helping build the backend of the business. And so I did that and I also started going to the workshops and going back into the early two thousands, there was nothing on zoom or recorded video was all in-person. Workshops and over a few years and going to 30, 40, 50 workshops. And I started to, to learn about workers' compensation through osmosis and all during that time, they also started to transition to where I was helping to research questions that our clients would ask. Then we had a change in the business in 2008, where I was suddenly responsible for being the lead instructor for the Institute and in being the primary contact. For folks. And I sometimes say that I'm a good example of the old adage that if you decide you want to be good at something, you can become really good at it if you dedicate yourself to it and over the years, my wife and I have taken ownership in the business and really dropped into a, what I would call a formal entrepreneur role. Although my, my father-in-law has always been very insistent. And I think this is something that, that I believe with the folks that work with us today is that, you know, the more employees you can have that entrepreneur mindset that are not just coming and clocking in every single day, they're thinking about what they can do to help grow the business and make it better. And that's always been drilled into me. No, to answer your question, I very much fell into this. My wife is funny. She says she swore growing up. She was never going to marry someone in insurance because she saw how hard her dad worked and how much he traveled. And so I could wink her into it because we'd been married for three or four years before I made the change. Wow. Yeah. She didn't know that was coming. She did not. Yeah. It's the mentality from what can I get to what can I give makes a big difference in an organization. Oh, absolutely. And it's, it's something, we're a very small team and, and that's very intentional and we might talk some more about that, but it's something that a spending, especially when you have a small team, uh, if you just have people punching the clock, it's going to be a real challenge to grow the business because you can't be the only person thinking about ways to make things better and ways to improve what you do and better serve whoever it is you're, you're serving in your business. So how can business owners really take charge of their workers comp costs to boost profits? That is a big load question. Yeah. Do your best. It's a two day workshop. We do a two day workshop to answer that question. Wow. So let's start at the beginning, which is that when you have employees, there are a tremendous number of challenges that they come with that you have to manage people, you have to manage payroll, you have to bring people in and out. You may have compliance obligations. And one of those obligations, if your, your business is large enough to be required to do this, uh, in your state and, and the requirements vary from state to state. Uh, some states effectively every single business, even if you're a solopreneur have to have workers compensation and other states like here, where I am in North Carolina. You're you have to have three or more employees to be required to buy workers compensation. And the first challenge with workers compensation is that both the insurance industry. So the people selling insurance. As well as, uh, business owners have been told that comp is comp and there's nothing you can do about it. And nothing could be further from the truth. In fact, workers compensation is the one type of insurance beyond every other type that you buy, where you as an employer can control what you pay without changing the check. The insurance company is going to write and you suffer a disaster. And to explain what I mean, I have a 16 year old son. If you've ever gone through having a kid and getting their driver's license, you know, that the, the birthday present that you as a parent received is an invoice from your auto insurance company for a dramatically higher. Uh, premium. And if you want to reduce that premium, you really only have two levers to do that. You can decrease the coverage that you purchase. So the insurance company would not pay as much if something terrible happened, or you can increase your deductible where you're going to have to pay more when something bad happens. Uh, and outside of that, there's really not much that you can do, but in workers compensation, there's, there's a tremendous amount. And the first thing businesses need to look at, and you're going to need to talk to your insurance agent to, to look at this because with the exception of a few States, California, Pennsylvania, Delaware, New York's in this club as well, most of this information is behind paywalls that you wouldn't as an employer wouldn't necessarily want to get into, but it starts with how your business is classified and your classifications depend on what your business does in most cases. And then in certain situations, specifically in the construction industry, most prominent, it depends on what the individual employees are doing. And in most States, there are more than 500 different classifications available that can be applied to a worker's compensation policy and the codes that are on your policy will determine the rates that you pay, which are all based on your pay and one thing that we see quite a bit in our work with insurance agents are businesses where, where the business or piece of the business is misclassified and that could happen because just a mistake was made when it was done initially, and that mistake's been repeated a year after year, but it can also happen because as we all know, businesses change also classifications. As a, for instance, if 10 years ago, you were one of the very first businesses to be involved in the commercial 3d printing space, there was no classification specifically for that. Uh, today there is because that industry has grown. And so you might've been in the right code 10 years ago when you started, but then in the meantime, uh, that has changed and you may not be in the correct class code. Um, and then once your business is properly classified, then you want to make sure that the payroll that's included on your worker's compensation policy is correct and worker's compensation is one of a few types of insurance that you pay for upfront, but then the insurance company, uh, comes back at the end of your policy to check your books. And in the case of worker's comp, that's all going to be about payroll. And let's say you said you're going to have a million dollars in payroll. You wound up having 1.5 million. You're going to pay some extra at that premium audit. The challenge for employers is that there's more than a dozen different kinds of money or substitutes for money that you may give to your employees that do not or should not be included for worker's compensation. And in our experience in doing this for 23 years now, we found that more than 75% of premium audits are incorrect. And almost in almost all of those cases, employers are wind up paying more than they should rather than the insurance company collecting less money than they should. And most of the time, the reason those mistakes happen is because the employer didn't know how to keep their records in a way to make sure that it was done correctly. A couple of simple examples in every state, except for Pennsylvania and Delaware, the premium portion of overtime pay is not to be included on worker's compensation. Now, most businesses do a pretty good job of keeping records of overtime because you don't want the department of labor showing up and getting in trouble for not paying people the right way. But if all you give the worker's comp premium auditor is Kevin made $50,000 last year without noting that 15 of that was overtime pay, then the auditor can't exclude that the way that they should. Similarly, gratuities are excluded from worker's compensation. So if you have a business, a restaurant would be the simple example where employees get tips. If what you give the premium auditor is the total amount of money that employee received and you don't break out the gratuities, they can't exclude that. And, and what you pay taxes on or don't pay taxes on is not the same as what you do and don't pay a worker's compensation on. So that's the, the starting point. And then you have, you know, what worker's compensation does, which is pay for employee injuries when someone gets injured at work. And so there's a tremendous amount of information out there. And your insurance company also has resources about keeping your business safe, which is an incredibly broad topic and pretty specific to, to whatever industry you're in, but it's traditional safety. It has been an amazing thing. And if you look at statistics going back 50, 60, 70 years, it is mind-blowing how far down the injury rate has dropped compared to decades ago, the number of people getting hurt at work has never been lower than it, than it is today. And there's a ton of reasons for that. But when employees do get injured, the cost of those injuries is continuing to go up like everything else. And so it's critical that employers have a plan for what's going to happen when one of their employees gets hurt. And I'm very deliberate in using the word when and not if, because you need to assume that it's going to happen and make your plan and then do the work to try and prevent that as best you can. But it starts with when someone gets injured, what doctor are they going to see? And in most states, employers have the right to direct their injured employee to a physician of the employer's choice. In the few states that don't allow you to demand that they go to a specific doctor, you can at least recommend that. And employee advocates will sometimes argue that's something in the employer's favor. We think about it very differently because occupational medicine is not the same thing as just general practice medicine. Now, the treatment may be the same, but the problem that you run into if you aren't using someone that focuses on occupational medicine is that a general practitioner, I get hurt at work today, I go to my doctor because my employer did what most employers do, just say, oh man, I think she got hurt. Go to the doctor and come back when you're better. And the doctor says, what do you do at work? So I lift 50 pounds all day, every day. So you're not going to be able to lift 50 pounds for at least a couple months. So here's a note for two months out of work and come back and we'll check you out. Now your worker's compensation is going to be responsible not only for the medical charges, but then also for the lost wages that employee has while they can't work. And a better strategy is to send them to a doctor who's going to say, okay, you can't lift 50 pounds for a couple of months. I'm going to let your employer know what you can do and they're going to bring you back to work. So we take that person that lifts 50 pounds all day, every day, and we find work for them inside the business that they are physically capable of doing. And that may be clerical work that may be going back into whatever team they were working with before, but just changing their job temporarily to avoid the things they aren't physically capable of. When you do that, you reduce the cost of that worker's compensation claim. And if your business is large enough to have an experience modification factor, which generally is going to be, if you're over about $7,500 a year in worker's compensation premium, although that's a ballpark, it varies a little bit from state to state, then your experience modification factor is going to be lower, which is a big component of how much you pay for worker's compensation. And I don't know how long I've been talking, but that is, that, those are the steps in a very brief nutshell. You know what? It actually worked out. I asked that one question, we created a masterclass out of it. That's valuable information for a business. You outlined everything that they would, not everything, but pretty much a lot of the high level stuff that they could be aware of. And it's, it can be a challenge like any, like everything in a business, but it is so important. And if it's important, first of all, because of what we've been talking about with the cost of your worker's compensation, you're doing the right things, your costs are, are going to be lower than if you just ignore it. Um, but secondly, you have employees working for you for a reason. You have work for them to do. And, and when someone is away from work, their work has to be done by someone else or it, it winds up sitting on the shelf and then a project is late or you're over budget or, or whatever else. And then beyond that, if, if that employee injured employee gets an attorney, then it winds up being a long, expensive deal that will very likely. Uh, results in that employee, no longer working for you at all. And now you're going to have to replace that individual. And I don't have to tell you or anyone that's listening, uh, that it is extremely difficult to find people today. And I've never known a time in my life. And you probably would agree with this, that people haven't said that it's hard to find good people. But what we've been hearing over the past several years is that it's just hard to find people. Like not even good people, just people that will show up. And, and when you lose a valued, strong member of your team and they get pulled into the workers comp system and wind up never coming back, that is a very expensive problem, regardless of what it does to your workers' compensation premium, because replacing a good employee is difficult and expensive. Very true. So what big changes do you see coming down the line when it comes to workers comp, business people can keep an eye on? It's interesting. And I just had this conversation with someone this morning. I'm convinced that adjusted for inflation, there's really never been a time when workers' compensation was less expensive than it is today. Rates have been going down in virtually every state for the better part of a decade. And I was doing some research recently for something that I was writing and I was looking at workers' compensation rates in Florida, which was, and I chose Florida because it's one of just a few states where the states set the rate and every insurance company has to offer the same rate. So it was a very level playing field. And I went back to the oldest information I could find, which I think was about 20 years old. And I looked at one of the most expensive workers' compensation codes, which is for carpentry on residential dwellings. And in adjusted for inflation, the rate in Florida for that work is about one third of what it was 20 years ago. And that has resulted in, in businesses growing substantially, but not really seeing a big jump in their workers' compensation premium. What we know is that rates can't go to zero. They're not just going to start giving out workers' compensation for free, but there is a question about what could trigger a change in what's happening. Because the reason that that rates for any type of insurance and specifically with workers' compensation go down is not because insurance companies think it would be fun to make less money, but rather because they're expecting to spend less to pay claims. And, and even with these decreases that we've seen over the past, you know, seven to 10 years, insurance companies are still wildly profitable when it comes to workers' compensation. Now, for anyone listening to this, you might be thinking, what is he talking about? My insurance prices went way up this last time I renewed my insurance. And currently things like property insurance for cars and buildings, liability insurance, that all of those markets are completely off the rails in terms of increases and difficulty getting the coverage that you need. It's all very challenging, but in workers' compensation, it's been very profitable. One of the things that, that we've seen turn trends like this around in the past are recessions. If you go back and, and I wouldn't necessarily encourage anyone to do this, but if you go back and look at the profitability of workers' compensation for insurance companies over the last 20 years, the worst years they had were 2009, 10, 11, and 12, all the way through the great recession and into the recovery. And, and that happens for a variety of reasons. Uh, people lose their jobs. And now suddenly that sore back that you've had, and you've just been working through, uh, you think now's maybe a good time to file a workers' compensation claim. If they're going to let me go and send me home, there's other kind of macro economic things that could, could impact that. But what I encourage employers to think about when it comes to workers' compensation, and I would say the same thing to insurance agents is if you're focusing on, on doing the right things, when it comes to workers' compensation, if you're building a positive work environment, so you love your employees and your employees more or less love you, then regardless of how the market changes, you're going to do as well as is possible because certainly despite all of the things that I talked about that the, you have control of, there are absolutely things that none of us can really control. We can't control the macro economics of the country. Uh, we can't control politicians who may change the workers' compensation laws in one state or another that result in higher rates. Uh, but, you know, focus on what you can control, uh, and, and you're going to do well. Kevin, you shared a lot of valuable information I'm sure is going to guide and serve people in the audience to even just to take a look again, to just review things that they currently have and to see if they can make some shifts that can improve the situation. So I really appreciate your time today, Kevin. Thanks. Thanks for coming on our show. And once the episode goes live, we'll send you an email. And if there's any final words you want to share, go ahead. Absolutely. Thanks again for, for having me. This has been an awful lot of fun. And if folks have any questions, if you, if you want to reach out, actually, I'm going to do it now because I've already stopped. Can I start again? Sure. Uh, one final thought for those of you listening, uh, a lot of the things that we've talked about, uh, you'll need to talk to your insurance agent about, right? They're the ones that can make changes to your classifications or verify that they're, they're correct. And I would encourage all of you, no matter the size of your business, even if you're, you don't even purchase workers' compensation, you know, communicate with your insurance agent. And the sad reality is that sometimes you as the client have to be proactive in driving that communication because your agent may not communicate enough or well enough and ask them questions, ask them about the. The coverages that you have and make sure that say, for instance, your building has the proper amount of insurance and your liability insurance for whatever you do is sufficient and make sure those things are right. And then with your workers' compensation, talk about the classifications. You might even ask them to provide you with a copy of the wording because there are just plain text descriptions about what each of these means. It's not just a number in a four or five word title, like you might see on your insurance policy, they deliver to you. If you have an experience mod, ask them to help you get a copy of your experience mod worksheets, you can review that together and understand the information that's there. It's very difficult for employers to navigate the insurance landscape period without a skilled insurance agent at their side, if you're listening to this and you have any questions or want to dig into something that you can reach out to me at Kevin at IWC pro.com. Our phone number is 8 2 8 2 7 4 0 9 5 9. We've built a course specifically for employers that goes much deeper into everything we've chatted about today. You can find information about that at locked and loaded training. Regular price for the training program is $1,500, but for listeners of the super entrepreneurs podcast, if you enter the code super at checkout, it will take $500 off of that 1497. And the course allows you to enroll up to three people from your company, but you don't have to go through it and then try and pass it down to other members of your team, or you might just have three team members that are the ones that need to, to dig into this. There's some stuff there that's probably going to bump into to finance. There's some other things that are going to be more in an HR alley. Now I'm sure that that some of the entrepreneurs that are listening are finance and HR themselves. So that might just be, might just be you. But thanks once again for having me. This has been an awful lot of fun. And as someone who can talk about workers' compensation for days, it's always a joy to, to share it with a new audience. Kevin, appreciate you. I can hear the passion in your voice and, and what you put together. Thank you so much for that offer. Definitely keep in touch and we'll speak soon. All right. Thanks so much. Take care. My pleasure.