Be aware of the risks in your county budget

By Bob Carruth
Risk Control Manager

It's that time of year again, commissioners: Soon, your county manager will hand you a budget for review and approval. You will most likely have the parade of outside agencies, interest groups, and other programs making the rounds, encouraging you to fully fund their programs. In these challenging budget times, you also have to keep an eye out on what will not be coming out of Raleigh, which will make your budgeting even more difficult.

Let me add one more thing to your plate – risk management costs. In a perfect world, no one has accidents, all the women are beautiful, and all the men are above average, right? Of course, we know we must move and operate in an imperfect world with imperfect results. If we didn't we wouldn't need government, would we? In fact, if you think about it, the essence of our job as elected officials is balancing the various risks in our communities, and returning to our citizens the best services at the most efficient cost.

Just like the questions you will be asking your social services director or local school superintendent when they present their budget requests, you should be prepared to ask the right questions and be informed of several things that have a direct bearing on the other costs you have and will be incurring to cover the accidental losses in your county. Here are five things you, as a county commissioner, need to be aware of:

1. Know your experience mod. No, this is not a measure of how you feel about the early 1970s. Every workers' compensation policy contains an experience modification factor, which is a number that is multiplied times your annual premium and thus can greatly affect your ultimate cost of exactly how much you will pay for workers' compensation insurance.

Without going into too much detail about how it is calculated, be aware that your losses are pulled for the most recent four policy years (but then excludes the past 12 months to give those losses time to be evaluated and mature). From the remaining three-year loss period, a factor is calculated and then assigned to you. This in turn is multiplied by the annual premium, adjusting it up or down to derive your final premium. Thus the calculation is a rolling three-year type of average. For each new policy term, the oldest year drops off and the most recent 12 months moves into the calculation formula.

A mod of 1.00 means you are average and as such does not change the calculated premium. If your mod is less than 1.00, your annual premium is adjusted downward – or vice versa if it is above 1.00. I have seen rates as high as 2.5 and as low as 0.6. This factor is one of the primary metrics used throughout industry to identify "good" risks and risks that need help.

2. Find out how many employees are being paid to sit at home. This is closely related to the experience mod. The longer you let injured employees sit at home, the greater your workers' compensation costs will be. Injured employees who remain out of work for six months or longer only return to their original jobs 50 percent of the time. Also, not having an aggressive return-to-work program can be attractive to the "pros" in the community that seek out jobs they know will pay the best workers' compensation benefits.

3. Talk to your sheriff about vehicle crashes. There is no other county-funded organization that has its employees on the road driving 24/7, 365 days per year. On top of this, the patrol vehicle is the most powerful vehicle the county owns and is often driven by a deputy who may or may not have been trained on the increased capabilities of the vehicle. It should come as no surprise that more than 50 percent of auto losses in the Association's Liability & Property Pool over the past 10 years have come from crashes and collisions involving patrol vehicles.

4. Know who your transit drivers are. These drivers are some of the most dedicated employees you have; in fact, other than the tax office, they may have as much public contact as anyone else working for county government. Most days, they are out in the community, working closely with senior adults and others with special transportation needs. You should make sure these drivers are physically able to perform what is required of them and have the care and safety of their passengers at the forefront of everything they do.

5. The bottom line is the bottom line. Price does not always equal cost. You should make sure your partner that is helping you to cover your risks is able to provide you with the specialized risk management services that are unique to county government. Most private carriers, if they provide service, will send someone to consult with who is trained in industrial safety and may have little experience dealing with the type of exposures and challenges that counties face. With more than 70 years of combined experience in risk control and local government, the Association's Risk Control Services staff is the most capable team in the marketplace to provide focused, relevant risk control services to North Carolina counties.

There are many other areas that could be covered, but there is not enough space or time to discuss them now. I encourage you to ask your county staff the right questions during this budget season about your insurance and risk programs. If you have any questions or need additional assistance, don't hesitate to call me at (704) 425-3321 or Michael Kelly at (252) 341-1939.

As Risk Control Manager for the NCACC, Bob Carruth manages the operation of the Risk Control Team for the Risk Management Pools. The team assists members with development of safety policies and programs and identification of liability exposures and controls. Carruth is a Certified Safety Professional and is certified as an Associate – Risk Management. A current Cabarrus County commissioner, he serves on the Board of Directors for Piedmont Behavioral Healthcare and the Water & Sewer Authority of Cabarrus County.