From The Iowa County magazine May 2024 issue

by Dean Schade, Risk Improvement Manager for the Iowa Municipalities Workers’ Compensation Association (IMWCA)

Uncovering Hidden Savings: Risk Management Strategies for Local Governments

As funding for local governmental services gets tighter and tighter, local leaders will need to not only look at alternative funding, but they will also need to uncover opportunities for greater efficiencies. Optimizing risk management strategies to reduce premiums, improve operations, and decrease human and property losses is such an opportunity.

Insurance premiums are established on the base of exposure and the level of use. For example, in workers' compensation, the exposure is based on the payroll of employees working in a specific work code. This is the simplified version of the manual premium. The level of use is determined by how many claims are filed and how much those claims cost. The higher the number of claims with large costs, the higher the user rate. If an entity works to keep the number of claims down and the costs low, they receive a discount under the premium formula. Conversely, the higher the claims, the premium can grow substantially. Generally, this principle is the same for all insurance coverages. For many years, insurance was easy to find and relatively inexpensive for most local governments. Today, the markets have substantially hardened for several reasons associated with generational losses making coverages harder to find and more expensive.

As an elected official, do you know if your entity is getting discounts for good experience or are you paying surcharges for poor loss history? Some officials are unaware that they are leaving tens of thousands of dollars on the table each year in higher premiums because they don’t understand what drives their numbers. Are you getting discounts because you are working to maintain a good loss history or are you lucky? If you have a high loss history, what are you doing to correct those issues leading to claims to reclaim the high premiums?

In addition to lowering premiums, good risk management practices help improve efficiencies. Preventing claims in workers' compensation or property damage allows your entity to utilize your resources to the highest level. If employees are injured they can’t function to their highest potential and, if the equipment is damaged it can’t be used as intended or when needed. By protecting these assets, you also prevent secondary costs like overtime to cover injured workers' hours or the costs of renting equipment to replace the one that is under repair.

A simple example of being proactive in risk management, which can lead to big savings, involves preventing slips and falls on ice and snow. Each year hundreds of local government employees in Iowa slip and fall on ice and snow leading to workers' compensation claims. Several counties and cities recognized this exposure and acted to prevent injuries by providing slip-resistant footwear, having a policy on using the footwear, and training on avoiding these incidents. For a number of these entities, the costs for the footwear were covered by grants. The costs of training their employees were covered by a reduction in lost time due to fewer injuries and lowered premiums. As the adage goes, “Sometimes you need to spend a little money to make a lot of money.”

As you consider options to fund services and reduce costs, make sure you don’t overlook the potential savings from good risk management. It’s good for your employees and your taxpayers!

Article author Dean Schade is the Safety and Risk Improvement Manager for the Iowa Municipalities Workers’ Compensation Association (IMWCA) and can be reached at (515) 657-2899.