Deciphering your Workers’ Compensation Experience Modification Factor can be like reading a foreign language version of instructions for installing an electronic device. Often, there is confusion about how the Experience Mod is calculated and how it impacts what they pay for their Workers’ Compensation coverage.
At its core, the Experience Mod is the ratio of the dollars the insurance company has to allocate to cover the costs of injuries to the dollars they expect to allocate during your prior three policy years.
Here are four key points employers should know about their Experience Mod to better understand the process and control their Workers’ Compensation costs.
1. Return-To-Work programs will lower your experience mod. Getting an injured employee back to work in some capacity will lower the indemnity payments which will lower the cost of the claim. The lower claim cost will lessen the impact on your experience modification factor. Also, in Nebraska medical only claims are discounted by 70% in the ex mod calculation. This key aspect is something that most employers don’t know and it is costing them money. This is why it is some important to try and keep claims medical only. There are many ways to accomplish this and it’s also is an area we excel at.
2. Your Experience Mod is compared only within your particular industry. There is a misconception among many employers, particularly those that are high-risk occupations, such as roofers, that their Experience Mod is as high as it is because they are being unfairly compared against less injury-prone occupations, like file clerks and bank tellers. In reality they are only being compared to other businesses within the same classification. So it is important to make sure your employees are being correctly classified.
3. Don’t assume that just because your Experience Mod is below 1.0 that everything is fine. If your Experience Mod is below 1.0, don’t assume it cannot be, or should not be, lower. Make it a point to know what the minimum Experience Mod is for your company and strive to reach it. For example, if your Mod is .85, but the minimum Mod is .61, your controllable is Mod .24. With a $100,000 premium, lowering the Mod to the minimum would save you $24,000. Lowering it even a few more points can save you significant money in the long run. If you don’t know what your minimum experience mod is you can contact us and we can review that for you. This information is crucial to share with supervisors and management so they understand the potential savings that can be attained by reducing employee injuries. This can lead to increasing your companies profitability.
4. Insurance companies don’t pay for your employee’s injuries. Claims are paid by employers through the Experience Mod, often at 200% – 300% interest. Each state has a limit at which an employee injury ceases to impact the Experience Mod and when you have a very large claim, the insurance company does wind up footing some of the bill. In most cases, though, the insurance company is simply temporarily financing it on the employer’s behalf.
No employer is expected to know everything about Experience Modification Factors. And, in fact, many insurance agents are baffled by its inner workings. But by possessing even the most basic information you will find yourself saving hundreds, if not thousands of dollars in Workers’ Compensation costs over the long run. If you want to learn more about how to lower your experience modification factor please contact us. UNICO partners with many fine companies like Allied, a Nationwide insurance company on your side, to bring you a total insurance solution.