Price or Safety? Priorities Change for Small Businesses After a Workers Comp Claim

Previous workers’ compensation claims can present an opportunity for agents serving small-business clients.

The Hanover’s “2024 Small Business Risk Report: A Focus on Workers’ Compensation,” which surveyed 300 small business owners, found that a workers’ compensation claim experience can influence a small business owner’s confidence in their insurance program, including the services they value and the workplace safety measures they have in place.

Once a small business owner experiences a claim, their insurance priorities shift away from price and toward safety. Almost 60% of small business owners who have not experienced a claim rank price as one of the two most important factors in their workers’ compensation purchase, while only 40% of business owners who have had more than one claim rank price as one of the top two factors in their purchase decision.

The more claims a small business owner has experienced, the greater value they place on risk management and claims. About 45% of small business owners who experienced more than one claim rated risk management services as one of the top two considerations.

More than two-thirds of small business owners consider an insurance agent’s recommendation to be a very important factor when purchasing workers’ compensation. Agents can leverage their experience and insights to educate customers about the importance of services and claims handling as essential components of their workers’ compensation program.

Workers Comp Opportunities

“With most business costs rising, small business owners continue to look for ways to reduce risk exposures,” said Charles F. Hamann, president of small commercial at The Hanover.

Only 63% of small business owners without past workers’ compensation claims are very confident in current preventative measures to prevent workplace injuries, presenting educational opportunities to agents. And only 45% completely agree that they spend sufficient time exploring their insurance options.

“The report data indicates small businesses value support from their independent agents. Additionally, the risk management services carriers offer today are critical to their success,” Hamann said. “While such services are ranked highly, there is an opportunity for agents and business owners to take a more proactive and holistic approach to worker safety.”

About 67% of small business owners have had at least one workers’ compensation claim in the past five years. Once a claim occurs, confidence in a business’ safety culture significantly drops. While 70% rate safety culture as “excellent” when they have never experienced a workers’ compensation claim, only 48% rate it as “excellent” once they have faced a claim.

For example, only 21% of small business owners take advantage of a nurse triage service before they experience a claim. This presents an opportunity for agents to educate customers on the value of proactive safety services. The number of small business owners using such a service jumps to 51% once they have experienced more than one claim.

While most small businesses offer safety training, there are real opportunities to enhance safety with additional services. Businesses are not consistently taking advantage of: workplace hazard assessments (63%), business continuity planning resources (38%) and telematics, or driver safety monitoring (33%).

Small business owners without claims also conduct fewer regular inspections and safety audits (51%) than owners with claims (68%). Fewer owners without claims (53%) have health and wellness programs than those who do have claims (65%).

The majority (87%) of small business owners reported at least one change in the last 12 months, with 68% reporting they hired new employees. In addition to hiring and training new employees, 34% of small business owners said they had payroll changes in the past 12 months. Owners often provide these updates to their insurance agents, presenting an opportunity to deliver more value through convenient pay-as-you-go services for workers’ compensation.

And while, 88% of respondents are confident they are adequately insured, small business owners anticipate many factors that could impact their workers’ compensation insurance program, including cost of insurance (56%), an economic downturn (39%), technological advances (37%) and mental health and stress-related claims (36%).

By proactively consulting, the report concludes, agents can offer guidance and valuable insights, identify potential risks and ensure that small businesses are taking full advantage of risk management services to stay ahead of risk.

Topics
Commercial Lines
Workers’ Compensation
Business Insurance