Complying with bidding requirements, contract administration, attention to detail, thoroughness, responsiveness, safety, budget and timeliness are huge parts of a general contractor’s job.
That’s why when evaluating bids from subcontractors, general contractors look at much more than the cost. In selecting the subcontractors, general contractors consider quality of work; safety record, including Experience Modification Rate (EMR) and OSHA compliance; expertise; workforce training; time efficiency; contract management; and reputation as well as the competitiveness of the bid.
While subcontractors can confidently present their expertise, experience and quality of work, it is often in the areas of safety, EMR, OSHA compliance and contract management that they lack expertise. Following are eight ways insurance brokers can provide subcontractors with valuable advice on how to strategically position themselves in these areas.
1. Reduce the EMR
The EMR has become a safety indicator of contracting risk, not only for public sector jobs, but also for private owners and general contractors. An EMR that exceeds 1.0 means lost work opportunities. Top general contractors, especially those constructing profitable pharmaceutical industry buildings, expect subcontractors to maintain a credit EMR to qualify for work. Capable insurance brokers will review existing claims and loss reserves, job classification codes and the data provided to the rating agency to be sure the EMR is correct. Then they work with the subcontractor to reduce the cost of claims, properly investigate accidents and successfully execute a comprehensive safety plan.
2. Implement a return-to-work program (RTW)
The longer an employee is out with an injury, the higher the cost, adversely affecting claim reserves and the EMR, as well as increasing the likelihood of litigation. RTW programs provide a means for employees to transition back to their full duty jobs with responsibilities and tasks modified for short periods of time. Knowledgeable brokers can help set up modified assignments, use evidence-based guidelines to establish realistic time frames, and help communicate the program to employees. Such programs send an important message to general contractors, as well as all employees, that the subcontractor values its workforce and that safety is a priority.
3. Establish early claims reporting
Competent brokers know the adage “time is money” applies to workers’ compensation. A week’s delay in reporting an injury can increase claim cost by 10 percent; claims filed a month or more after an injury cost 48 percent more to settle than those reported in the first week. Late claim reporting leads to delays in appropriate medical treatment, which can affect the cost of medical care, recovery time, wage replacement and return- to-work opportunities.
4. Monitor OSHA standards
Staying on top of OSHA requirements is a daunting task and the prospects of an OSHA inspection strikes fear in the heart of a subcontractor. In FY2014, the cost of the average OSHA fine increased and there were almost 25 percent more companies placed in the Severe Violator Enforcement Program. At the same time, safety and health inspections involving temporary workers increased 322 percent. All of this means subcontractors can benefit from professional guidance in staying OSHA compliant and properly preparing for the possibilities of an inspection.
5. Strengthen hiring practices
The shortage of skilled labor in the construction industry is a real concern; however, it is not an excuse for side-stepping the best practices in hiring and retaining competent employees. A well-crafted hiring practice, including pre-employment physicals and appropriate drug testing, is the best way to avoid workers’ compensation claims or OSHA violations.
6. Assure no premium surprises
Because payroll can fluctuate significantly with work activity and workers’ compensation audits are only done once a year, it’s important to have a system in place to assure adequate premium deposits so there are no major surprises at audit time. Responsible brokers offer “pay as you go” payroll reporting, which bundles workers’ compensation and general liability premiums with each payroll or periodically check payroll activity to assure adequate deposit premiums.
7. Assist in reviewing contracts
While winning the job is the ultimate goal, it’s crucial to fully understand the terms of the contract and your legal and insurance obligations before signing the contract. Insurance and legal language can make one’s eyes glaze over; therefore, it’s critical to have a lawyer and insurance broker review the documents, office advice on the issues related to it, make recommendations to provide maximum protection and help assure compliance. Insurance brokers also can provide sample subcontract agreements and hold harmless agreements that are in the company’s favor.
8. Provide tailored insurance coverage
Subcontractors should expect brokers to take the time to understand their risk and provide detailed coverage proposals, including alternate quotes for contractors professional liability and “work coverage” and/or construction errors and omissions. Brokers should demonstrate they understand the general contractor’s requirements for bonds and certificates of insurance, can issue certificates quickly and have expertise in owner controlled insurance programs.