What is an Experience Modification Factor in Workers’ Compensation Insurance?

As an employer, knowing your company’s experience modification factor and how to properly calculate it is important. Otherwise, you might accept a Workers’ Compensation insurance quote that’s too high.

Experience modification factors are calculated by assessing companies’ histories of workplace injuries and filed Workers’ Compensation insurance claims. These experience modification factors, along with company classifications and rates, can greatly impact the overall cost of Workers’ Compensation insurance for companies. For some employers, this might seem unfair, as many workplace accidents have little to do with a company’s ability to provide a safe working environment. If your company’s experience modification factor is high, you can still find affordable and comprehensive Workers’ Compensation insurance by partnering with our brokers.

At NPN Brokers, we care about helping employers get the Workers’ Compensation insurance they need to protect themselves and their employees. To learn more about the Workers’ Compensation insurance brokers at NPN Brokers, call today at (561) 990-3022.

What is an Experience Modification Factor in Workers’ Compensation Insurance?

An experience modification factor is an assessment of a company’s risks to insure for Workers’ Compensation insurance purposes. It accounts for various risk factors, including a company’s history of workplace accidents.

Figuring out your company’s experience modification factor is important, especially so you know what to expect from Workers’ Compensation insurance premiums. Our Workers’ Compensation insurance brokers can help calculate your company’s potential experience modification factor based on previous worker injuries and filed claims.

Workers’ Compensation insurance carriers calculate experience modification factors using a simple equation. Essentially, they divide a company’s actual losses incurred because of workplace injuries over the past several years by expected losses. Workers’ Compensation insurance carriers learn a company’s actual losses by reviewing previous claims for workplace injuries. They then estimate a company’s expected losses by looking at other risk factors, including payroll and industry classification.

Remember, the experience modification factor helps Workers’ Compensation insurance carriers assess risk, which is why payroll and industry are included in the equation. The more workers a company employs, and the more dangerous the industry it operates in is, the higher its experience modification factor may be.

The experience modification factor for your company relies on concrete numbers, like payroll and annual losses, as well as estimates, like expected losses for the coming year. Because of this, some Workers’ Compensation insurance carriers might come up with different numbers when calculating a company’s experience modification factor. Understanding this is important so that you know to get multiple quotes when searching for Workers’ Compensation for your company.

How Do Experience Modification Factors Affect the Cost of Workers’ Compensation Insurance?

A company’s experience modification factor heavily influences the price of Workers’ Compensation insurance premiums. Learning more about this process is important so employers better understand the possible cost of insurance.

There are two steps in determining the price of Workers’ Compensation insurance policies. The first involves learning your company’s classification and its corresponding rating, also known as its manual premium. Some states classify companies using guidance from the National Council on Compensation Insurance, while others use their own classification systems. Regardless, reach out to our Workers’ Compensation insurance brokers if you have difficulty learning your company’s classification and rating.

The base amount a company may pay in Workers’ Compensation insurance is determined by multiplying its payroll by its manual premium. Then, the experience modification factor is evaluated to determine if premiums should rise above the base amount employers in a certain industry must pay for Workers’ Compensation insurance premiums in their state.

The experience modification factor personalizes the equation for Workers’ Compensation insurance premiums for individual companies. While it can help some Workers’ Compensation insurance carriers to assess risk, it shouldn’t be used as an excuse to unnecessarily hike up premiums. Our Workers’ Compensation insurance brokers can help explain how your company’s experience modification factor might impact the cost of coverage and help you identify unnecessarily expensive Workers’ Compensation insurance quotes.

How to Get Workers’ Compensation if Your Company Has a High Experience Modification Factor

When employers learn about their company’s experience modification factor, they might think that finding affordable Workers’ Compensation insurance is a longshot, especially if they are in a high-risk industry. Our brokers can help you find coverage that won’t break the bank, regardless of your experience modification factor.

Unfortunately, employers can’t always prevent workplace accidents and Workers’ Compensation insurance claims. Despite employers providing a safe working environment for employees, accidents might happen, causing their experience modification factor to increase. Even if you already have Workers’ Compensation insurance, your premiums might rise because of an increased experience modification factor.

Partner with our brokers to prevent your high experience modification factor from resulting in expensive Workers’ Compensation insurance. Our team of experienced professionals have relationships with carriers that offer flexible, comprehensive insurance to various types of businesses, including those with high experience modification factors. For example, you may be able to get a pay-as-you-go plan, which allows premiums to change as a company’s payroll does. This can result in more accurate Workers’ Compensation insurance premiums, allowing you to only pay for coverage for workers you currently employ.

In addition to offering these advantageous policies, the Workers’ Compensation insurance carriers our brokers work with do not require audits, contracts, or deposits. Even if your company is estimated to have a higher experience modification factor, you can still get affordable Workers’ Compensation insurance when you partner with our brokers.

Call Our Brokers to Get Workers’ Compensation Insurance Quotes Today

If you need Workers’ Compensation insurance for your business, our brokers can help. To learn more about the Workers’ Compensation insurance brokers at NPN Brokers, call today at (561) 990-3022.