Using Risk Management To Build A Better Benefits Plan

Traditionally, benefits and property and casualty have been treated as two completely unrelated practice areas. Individual agents tend to specialize in one or the other, and even full-service firms often use separate specialty teams.

However, there is a symbiotic relationship between these practice areas, and specific situations may give rise to interconnected property and casualty and employee benefits issues that are difficult to separate.

Consider this scenario: During standard operating hours, an obese, diabetic, long-term smoker drives a company vehicle to make sales calls. One day, the employee lapses into a diabetic coma on the way to visit a customer and crashes the company car into a building. Who is responsible for the damages to the building? Who is responsible for the salesman’s injuries from the wreck? Is this a workers compensation claim, or are the injuries covered by his group health coverage? These are just a few of the questions that will be raised or will need answers.

Understanding how clients manage their risk provides benefits agents with valuable insight on how to help a client handle benefits issues. It is important for agents to have not only a full understanding of their client’s approach to risk management, but also a familiarity with the specific areas that overlap, such as workers compensation coverage and administration, client loss experience and coverage related to safety and benefits plan administration.

Workers compensation is the most important form of coverage for benefits agents to understand. When an accident occurs, the first question asked is, “Was this work-related?” How this question is answered determines how the entire claim will be handled. If the accident is work-related and the company does not have workers compensation, it is important to know if the group health plan will cover it. In most instances, group health plans clearly exclude injuries that should be covered by workers compensation.

On the surface, an accident may appear to be work-related. However, various studies from the National Council on Compensation Insurance have shown that there is a direct correlation between work-related accidents and wellness, so the root cause of the accident might lie in previous decisions about the injured person’s personal health care. Unhealthy workers are more prone to work-related injuries because their ailments make it harder for them to function in a safe manner. For example, an obese worker who does not monitor his diet and never works out is more likely to suffer from sprains or strains from day-to-day job functions than someone who lives a healthier lifestyle.

By understanding this correlation, agents may help their clients invest in a wellness program that can ultimately result in reduced workers’ compensation costs.

How a client administers its workers compensation program can also provide predictive insights about how it can be expected to administer its benefits program. A client who changes workers compensation plans every year is likely to change benefits plans every year. Likewise, a client who uses cost as the primary selection criterion for a workers compensation plan will probably use the same criterion for selecting a benefits plan. It is hard for any plan to gain traction if it has to be retrenched each year.