The Impact of Safety Professionals and Safety Culture in Reducing Workers' Compensation Costs and Workplace Injuries

American Society of Safety Engineers (ASSE)
1800 E. Oakton Street, Des Plaines, IL, 60018 847-699-2929

Formed in 1911, the Des Plaines, IL-based ASSE is the oldest and largest professional safety organization and is committed to protecting people, property and the environment. Its 30,000 occupational safety, health and environmental professional members manage, supervise, research and consult on safety, health, transportation and environmental issues in all industries, government, labor and education. For more information check ASSE's website at www.asse.org.

Contributing ASSE members: Kim L. Arnold, ARM, ALCM – KLA Consulting, Dublin, Ohio, ASSE Public Sector Practice Specialty Administrator

Dirk J. Duchscherer, CSP, ARM
Risk Control Manager, InterWest Ins. Services Inc., Sacramento, CA
ASSE Risk Management/Insurance Practice Specialty Assistant Administrator

Steven E. NyBlom, CSP, ARM, ALCM
Loss Control Manager – County of Los Angeles – CAO Risk Management Branch,
Los Angeles, California, ASSE Risk Management/Insurance Practice Specialty Administrator

As corporations attempt to control workers' compensation costs to reduce the impact on the bottom line, occupational safety and health professionals are integral to tackling this issue. What are safety professionals doing for companies to reduce workers' compensation costs? What can workers' compensation practitioners do to help with the safety and health efforts?

Companies that invest consistently in safety realize positive bottom line results, reduced absenteeism, lower turnover rates, higher productivity, increased employee moral and positive brand image. According to a 2001 report issued by Liberty Mutual Insurance Company, the survey found that 61 percent of executives say $3 or more is saved for each $1 invested in workplace safety.

As injuries and illnesses decrease so to do health care and workers' compensation costs. According to ASSE's white paper ‘Return on Investment (ROI) for Safety, Health and Environmental Management Programs,' investment in a Safety, Health and Environmental program is a sound business strategy for any organization, regardless of size, and will lead to having a positive impact on the financial bottom line. Investing in safety can also reduce ‘false claims or wrongful termination lawsuits.' Some examples of savings attributable to safety programs include participation in the Occupational Safety and Health Administration's (OSHA) Voluntary Protection Program which has saved one company $930,000 per year and they had 450 fewer lost-time injuries than its industry average ; also, a Safety & Health Assessment & Research for Prevention Program (SHARP) participant reduced its lost workday incidence rate from 28.5 to 8.3 and reduced insurance claims from $50,000 to $4,000 through decreases in both direct and indirect losses through a reduction in its number of back and shoulder injuries (Abrams).

Safety has a major impact on workers' compensation losses, especially when you focus on actual costs. Historically safety was not involved in workers' compensation and cost issues; instead corporations used safety programs specifically to address regulatory and compliance issues after the establishment of the Occupational Safety and Health Administration (OSHA) in 1971. However, today safety, health and environmental programs play a vital role in reducing a corporation's financial losses, especially when insurance markets are “hard” and premium rates are at a high level .

During a “soft” market, such as in the 1990's, corporations bought insurance at low costs, and invested considerably less in safety programs. In “hard” markets, such as today's current business climate, corporations use safety to cut claims and reduce insurance costs; costs which otherwise are paid over time (because of the upward impact of loss frequency on experience modification, and therefore on the cost of insurance) since the accidents are not being prevented, only insured. These cost effects are even more noticeable for corporations that are allowed to assume their own risk of losses through a program of self-insurance. Also, investing in mainly insurance, and excluding safety programs, can have a major negative impact on the efficiency, morale and health of the corporation. September 11, 2001 has changed a lot of people's thoughts on general operations of a company in terms of safety, security, insurance, etc. People are obviously now more aware of potential threats, and are becoming more proactive with regard to safety issues.

Among their many duties and responsibilities, safety, health and environmental professionals look at injury and illness data, focusing not only on real losses but also potential losses. Corporate management executives need to focus on the potential losses in workers' compensation programs, which are often missed and can really add up in financial costs. An example of this is the possible threat of workplace violence, a potential problem that safety professionals and management need to assess in developing a crisis management plan/business interruption/resumption plan. One needs to keep in mind that management, insurance professionals and safety professionals do not share the same experience base from which to understand potential losses and the larger picture of how potential losses can affect the entire corporation.

Employees that handle workers' compensation, from loss control personnel to human resources and also workers' compensation administrators at corporations, can assist safety professionals by providing information regarding the cause or causes of frequent and severe losses,since inadequate one line descriptions are often all the safety professional receives about a loss. By assisting in analyzing the data at hand, administrators can help safety professionals determine not only the causes of losses, but also the potential remedies or controls to assist in the prevention of future similar losses. Analysis of loss data is key in improving safety, determining how dollars are spent on workers' compensation costs, medical bills and other related costs that affect the bottom line of any entity.

On the other side of insurance and workers' compensation, regulators can help corporations and safety professionals by providing educational tools, ranging from interpretations on issues, to complimentary site visits, examples/sample programs, photos and informational tips for corporations and their employees to help make things as clear and understandable as possible in providing safety and health to workers and ensuring reduced losses.

In addition to assessment of losses, corporations should establish a proper structure in handling and preventing workplace injuries and illnesses through an effective safety, health and environmental program. That is where developing and maintaining a safety culture is key. This involves bringing the concepts, practices and methodologies of safety and integrating into the corporate culture of a company, so safety is present at all levels. For example, a petrochemical company completed a construction project in Saudi Arabia on time with an exemplary safety record. (Walker/Smith). In their article ‘Creating an Extraordinary Safety Culture' Walker and Smith stated that “by changing the focus of safety from ‘requirements to comply' to an attitude of ‘I want to work safely,' most workers returned home each night injury-free. As a result [the company] enjoyed enhanced productivity and superior morale, while avoiding downtime…and human costs associated with incidents and injuries.” Establishing a safety culture and getting safety at the organizational level helps reduce at-risk behavior at all levels of the corporation, at-risk behavior that could otherwise lead to additional financial losses. Employees at all levels of the corporation need to hold the proper attitudes and motivation in reducing the likelihood of injuries or fatalities on-the-job that could have devastating effects on a corporation financially.

Education is important in bringing about a safety culture as employees at all levels from line workers to top management should be involved in the safety process. It is a good idea to get employees involved with assessing losses and participating in job hazard analysis, since they are the ones doing the tasks and provide a first-person perspective. What tools or devices are needed to reduce back or hand injuries? Sometimes there can be a very simple solution to questions like these (such as providing a longer wrench) which can significantly reduce back injuries for a group of workers.

From a future standpoint – everyone from safety professionals to insurance professionals and upper management need to keep value in their safety programs. Earnest stated in his article ‘Making Safety a Basic Value' that safety “is often referred to as a priority…priorities can change daily in response to situational demands. When safety is a basic value, it becomes the ‘natural way' of performing a job - anything less is unacceptable.”

Investing in safety will greatly enhance a corporation or public entity, building a better working environment. The markets and worldview has changed considerably since the 90's when insurance was less expensive for corporations. But two factors play a major role of why failure to invest in safety is a risk in itself. 1) It can't be determined when the market will change so costs could easily climb high, and 2) Corporations with safety, health and environmental programs in place will achieve savings for fewer losses, thus establishing a major cost benefit. And most importantly, investing in effective safety, health and environmental programs can save lives, prevent injuries and reduce potential financial losses, including hidden/indirect costs.

REFERENCES

Abrams, A. (2001-2002) Safety Management Programs Make Dollars and Sense. ASSE Management Practice Specialty Newsletter, The Compass. Volume 2, Winter 2001-2002.

ASSE. (2002) White Paper Addressing the Return on Investment for Safety, Health and Environmental Management Programs. June 2002.

Earnest, R.E. (2000). Making Safety A Basic Value. Professional Safety, volume 45, no. 8.

Friend, M., L. Pagliari. (2000) Establishing A Safety Culture: Getting Started. Professional Safety, Volume 45, No. 5.

Liberty Mutual Insurance Company. (2001) A Majority of U.S. Businesses Report Workplace Safety Delivers a Return on Investment. August 29, 2001.

Walker, E. J. Maune. (2000) Creating an Extraordinary Safety Culture: People, Commitment, Values, Best Practices. Professional Safety, volume 45, no. 5.

Copyright 2004 IAIABC Journal; reprinted with permission