It was a Christmas “present” no employer expected or wanted substantial increases in year 2000 workers’ compensation premiums, sometimes of 100 percent or more.

The increases were announced by many insurance carriers on the day before Christmas, and became effective Jan. 1, giving employers scarcely five business days to shop for lesser premiums.

As a result, the workers’ comp business shifted from a buyers’ market to a sellers’ market over the holidays.

The reasons for the sudden and stiff rise in premiums are well known by now. In the 1990s, the deregulation of the workers’ comp insurance industry triggered a wild scramble some called it a “premium war” for market share, with many insurers discounting premiums 30 percent or more.

However, during the past five years of deregulation, insurers’ claim costs have risen while heavy discounting consumed their profits. The overall financial stability of even California’s largest workers’ comp carriers was threatened. California Insurance Commissioner Chuck Quackenbush, as well as stock market investors, duly noted the dwindling profits and growing instability of insurers.

Last October, Quackenbush suggested a “modest” 18.4 percent hike in the state’s basic workers’ comp premium rates. Meanwhile, disillusioned investors hammered the stock of some of the state’s largest insurers to unprecedented lows, reducing the stock value of some by as much as 80 to 90 percent.

What followed in late 1999 was considerably more than mere sticker shock. While many employers had anticipated a modest premium boost, perhaps 20 percent in step with Quackenbush’s suggestion, few were prepared for the size and depth of the Christmas increase.

Today, for many California employers, the premium increase may spell the difference between profit and loss. Many businesses, both small and large, are asking how they can blunt, if not mitigate, the new sky-high workers’ comp premiums. While these new premiums are not likely to change, careful attention to details may, in fact, lead to future pricing reductions.

The following are proven ways business owners can reduce claim costs, return employees to work sooner, eliminate potential workplace hazards, and instill employees with a much higher level of “comp consciousness.”

-Carefully select an insurance provider that understands your company’s need to reduce claims and costs while providing workers the care they need.

-Return employees to work as quickly as feasible when a claim does occur. In many cases, workers will want to get back to work if you make it possible for them to do so. Most employers can provide modified work duties, tasks that injured workers can do, until they are 100 percent capable of returning to their regular jobs.

-Schedule monthly safety meetings and use the written safety plan that OSHA requires you to enforce. Keep in mind that it’s only a “plan” if it is aggressively implemented.

The monthly safety meeting is the perfect place for supervisors and employees to discuss recent claims, learn how accidents can be prevented, and allow employees to witness first-hand demonstrations of safety practices.

-Organize a safety committee with members who serve as your safe-practice watchdogs. Their assignment is the immediate identification of unsafe situations that might lead to an injury or claim.

-Conduct regular inspections of the workplace in an effort to discover hazardous conditions that could lead to a claim. A cursory walk-through isn’t good enough. It must be thorough. When you do find hazardous conditions, immediately schedule the problem area for repair, replacement or alteration.

-Put a manager training program in place that is designed to educate managers and supervisors, not only in loss prevention, but also in monitoring claims to avoid repetitive ones or “sympathetic” claims by other employees.

-Establish a safety incentive program that rewards employees for no time lost to injuries over a specific time period. A reward system for safety consciousness can go a long way. Be aware that employees are quick to discern whether management really cares about safety or doesn’t. If you have a company for which the new, higher workers’ comp premiums actually threaten profitability, tell your workers so. Management needs to help them understand that claims threaten the company’s future.

-Now, more than ever, the ways in which you anticipate claims and manage the ones you have will dramatically impact your bottom line. Select an aggressive claim-handling insurance company that is as concerned with losses as you and your company. Quality insurers aggressively root out fraudulent claims. Be certain your carrier does.

-Embrace the aid of loss-control experts from the insurance company’s staff and your insurance agent. It is your greatest challenge to be the expert at running your particular business. Demand that those who are specially trained to help contain costs are attentive to your company’s needs.

-Perform a detailed review of open claims annually with your insurer to make sure claim reserves (money set aside to pay claims) are proper and sufficient. Annual claim costs directly affect your workers’ compensation premiums.

Remember that a cursory review of open claims is not good enough. You must study every claim. Put in writing how similar claims can be prevented in the future and understand how each claim affects your workers’ compensation premiums.

Steven Brown is president of Hoffman Brown Co. in Sherman Oaks. He can be contacted at [email protected].

Entrepreneur’s Notebook is a regular column contributed by EC2, The Annenberg Incubator Project, a center for multimedia and electronic communications at the University of Southern California. Contact James Klein at (213) 743-1759 with feedback and topic suggestions.