The late 1980s and early 1990s marked a time of crisis for Rhode Island insurers, causing workers’ compensation prices to soar to some of the highest levels in the country. These exorbitant prices can be especially debilitating to small businesses that lack the power to negotiate fair premiums with large insurance companies.
Sid Goldman, president of Greylawn Foods in Cranston, helped start the Business Industry Risk Management Association (BIRMA) with seven other small businesses to provide self-insurance for small businesses in 1991.
Seifert Systems Invests in Energy Efficiency to Strengthen Operations
For manufacturers, energy is more than just another operating expense. It plays a critical role…
Learn More
All businesses were being grouped into the same category with policies written to reflect the insurer as a company of last resort, said Goldman, who employs about 45 people in his food storage and distribution center. The result was extremely high premiums.
Today, BIRMA has about 30 members, down from a high of between 50 and 60 members in the mid-90s, and is an insured product through The Beacon Mutual Insurance Co. The threat of joint-several liability forced BIRMA to abandon its practice of self-insurance in 2000, said Goldman.
Instead of being lost in the shuffle with a larger insurance company, BIRMA has the ability to stay on top of the claims, find the very best doctors and see the claim through to the end, said Goldman, the group’s vice president.
Ellis Waldman, president of Walco Electric in Providence, has seen a lot of change in the workers’ comp system in Rhode Island over the last 15 years.
The workers’ comp crisis of the 1980s saw phenomenally high rates that were deemed a “disaster” for Walco, said Waldman, who currently employs about 100 people in his company that provides mechanical and electrical solutions for businesses.
Those high rates led Waldman to BIRMA. Instead of being at the mercy of large for-profit insurance companies, Waldman had the backing and support of people in the same position, which resulted in significantly lower premiums.
“The luckiest day for Walco Electric was becoming a member of BIRMA,” said Waldman.
Walco’s experience modification rate (experience mod), a calculation of a company’s workers’ comp claims against a similar-sized company in the same industry, directly correlates to workers’ comp rates. Walco’s experience mod is the lowest it has been in a decade, said Waldman.
As opposed to working on their own with little leverage, small-business owners have the advantage of people working on their behalf who can communicate and negotiate with people whom small-business owners ordinarily would not be able to, said Goldman.
“The issue is peer pressure,” said Waldman. “It makes the system work that much better.”
BIRMA can offer its members discounted rates because they are a nonprofit entity, said Goldman. The nonprofit can offer a return on the premiums at the end of each year to a company that maintains a 60 percent or less loss ratio on its workers’ comp policy. A company can recoup between 14 and 17 percent of their premium.
Overall, the group reported a 34 percent loss rate compared with national averages that exceed 80, 90 and even 100 percent, said Goldman.
BIRMA offers rewards such as a safety incentive program for its members by holding a raffle with money prizes to any employees who do not miss work in a given month.
“(A company) can’t have a good or great performance without accountability,” said Waldman.
In the 1980s and early 1990s, Massachusetts and Rhode Island offered comparable workers’ comp insurance rates, albeit near the top in terms of prices. Now Rhode Island has rates that are 10 percent higher than Massachusetts.
“(The workers’ comp system) has improved but it is not where it can or should be,” said Waldman.
Goldman said BIRMA is spread by word-of-mouth. The board of directors looks at the current premiums of a company, the attitude of the individual and the safety record of the company.
A larger issue according to Louis Soares, manager of small-business services at the Rhode Island Economic Development Corporation, is that small-business owners are busy and don’t necessarily have the time to dedicate to understanding the myriad changes that are common in the workers’ comp regulations.
The EDC, like BIRMA, is a good resource for small businesses to better understand the regulations and have a forum for recourse if necessary, said Soares.
“The business community wants to know what general rules are,” said Soares. The goal of the EDC is to make the regulations “as clear as possible.”
Giovanni D. Cicione, a lawyer with Adler Pollack & Sheehan in Providence, said another option may be to adopt legislation that would allow businesses to forgo the required workers’ comp insurance. Companies could then manage their own risks and it would “provide a real incentive to protect their employees,” he said.
“For some companies, it would be a better decision to opt out (of the workers’ comp insurance),” said Cicione.
