How Do Workers’ Compensation Experience Modifiers Work?
If you own a company, you might have heard about experience modifiers in relation to Workers’ Compensation. But what exactly are experience modifiers, and how do they work?
Experience modifiers, also known as e-mods, are the result of a company’s actual Workers’ Compensation losses divided by its expected losses. The result is then compared to the average Workers’ Compensation losses of similar companies in the industry. This calculation is done to determine whether or not a company is especially risky to insure. If your company’s experience modifier is above 1.0, it is risky. If it is below 1.0, it is not risky. Your experience modifier will largely determine the cost of your company’s Workers’ Compensation premiums. Workers’ Compensation experience modifiers can be lowered over time by reducing the number of accidents in the workplace.
To find insurance for your company today, call the Workers’ Compensation insurance brokers at NPN Brokers at (866) 340-9120.
What Are Workers’ Compensation Experience Modifiers?
When calculating Workers’ Compensation costs, insurance carriers will look toward a company’s experience modification factor. This factor explains whether or not a company is risky to insure, based on their industry and history of Workers’ Compensation claims.
Experience modifiers are specific company ratings typically set by the National Council on Compensation Insurance. These ratings attempt to show whether or not a company is at a higher risk of workplace accidents than its counterparts based on its history. At its core, an experience modifier is a multiplier used to calculate Workers’ Compensation premiums.
Experience modification factors of individual companies are compared to the overall industry. If your company’s experience modifier is above 1.0, then its claims history is worse than comparable businesses. If it is below 1.0, then its claims history is better than comparable businesses.
If your state does not use the National Council on Compensation Insurance to set experience modifiers, it will use its own state rating bureau. Our Workers’ Compensation insurance brokers can help you determine which agency will assign your experience modification factor and which claims are factored into the equation. For example, if an employee was injured on the job but is not expected to miss time from work, their claim will not be factored into your company’s experience modifier.
How Are Workers’ Compensation Experience Modifiers Calculated?
As an employer, it is important to understand how experience modifiers are calculated so that you know whether or not the e-mod assigned to your company is correct. Preparing yourself on this front can also allow you to know what to expect regarding your company’s Workers’ Compensation premiums.
Experience modification factors are determined by dividing a company’s actual losses by its expected losses. The first part of this equation is simpler to determine, as you can look at your company’s previous Workers’ Compensation claims to identify its actual losses. To calculate e-mods, the past three years of a company’s claims will be assessed.
Then, there is the matter of expected losses. The National Council on Compensation Insurance or your state’s rating bureau will assess statewide claims costs within your industry. This information may not be easily accessible to you as an employer, as the NCCI and other rating bureaus pool industry information to determine expected losses for companies of a similar size and industry.
Our brokers can help you estimate your business’s e-mod so that you are prepared for the possible cost of Workers’ Compensation for your company.
Workers’ Compensation Experience Modifiers and Insurance Premiums
In short, the higher your company’s experience modification factor is, the more expensive its premiums will be. While this can make finding Workers’ Compensation harder for some companies, our brokers have experience pairing businesses with high e-mods with affordable Workers’ Compensation policies.
As previously stated, companies with e-mods higher than 1.0 are riskier to insure. This is because their actual losses over the past few years were higher than the average losses among companies of similar industry and size. This typically leads to more expensive Workers’ Compensation premiums and difficulty finding coverage. However, our brokers have long-established relationships with carriers that are open to offering policies to high-risk companies at an affordable rate despite a high e-mod.
Suppose your company’s experience modifier is lower than 1.0. In that case, that means that it is not risky to insure and that its actual losses are lower than average losses among companies of a similar size and industry. If that is the case for your company, keep up the good work. Know that its experience modifier might change as its employee claims do, impacting the future cost of its Workers’ Compensation. If, despite having a low e-mod, you are still presented with expensive Workers’ Compensation quotes, contact our carriers for assistance.
How to Lower Your Company’s Workers’ Compensation Experience Modifier
Having a high experience modifier is not the end of the world. While that might mean your company’s Workers’ Compensation premiums are more expensive right now, its current e-mod is not permanent and can be reduced with concerted effort.
You can lower your company’s experience modifier by reducing the number of Workers’ Compensation claims among employees. To do this, implement safety programs like drug-free workplace programs. Doing this allows you to eliminate Workers’ Compensation claims due to drug or alcohol use. Many states also offer Workers’ Compensation credits to employers that implement certain safety programs.
Mandating training for employees, running background checks on workers, and increasing managerial oversight can also lower your company’s experience modifier when it comes time to renew your Workers’ Compensation policy. Employers who offer transitional jobs to injured employees can lower their actual losses, decreasing their experience modification factors and positively impacting their Workers’ Compensation premiums.
Call Our Brokers to Secure a Workers’ Comp Policy
Call our Workers’ Compensation insurance brokers at (866) 340-9120 to get a quote from NPN Brokers today.
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