Ouch! Workplace accidents impact your bottom line.
If your business has had a higher-than-average rate of injury or illness, the words, "experience modification" probably sound like nails on a chalkboard. If you don’t know what an experience modification is or how to influence it, keep reading! It is an important factor affecting your insurance costs and something employers should not ignore.
In order to understand what an experience modification ("ex mod") is, it's helpful to first understand how insurance works. The basic idea of insurance is that a group of people are sharing the risk of experiencing a loss. The losses of the entire group can be predicted with a fair degree of accuracy; however, it is not possible to predict which of the group members will actually have a loss. Because of this, the cost of insurance is apportioned to each member on the basis of average cost for the group. It is assumed that each member’s own experience will approximate the average. In reality, some risks are much worse than average, and some are much better.
You are probably thinking, "If my loss record is better than average, I should get some sort of reward." You aren't alone on that idea. Experience rating was created to encourage the prevention of workplace accidents. Your ex mod is determined by comparing the actual losses your business has during the experience rating period to the average expected losses for all members of your group. Who is in "your group"? Your group is made up of other business in your same industry classification. The comparison is done this way so that office workers, for example, who have an inherently lower risk of workplace injury than construction workers, will have a lower classification rate.
You might also be wondering, "Are all claims equal?" No, they aren't. While having one severe workplace injury can be a matter of chance, having a frequent occurrence of smaller workplace injuries is largely controllable. A history of small but frequent injuries can indicate that a company might face larger ones in the future.
How does your ex mod affect your premium?
How long do workplace accidents affect your ex mod?
The "experience rating" period is three policy years, excluding the most recent policy year. That means the accidents your company experienced during your 2005, 2006 and 2007 policies are still factoring into your ex mod today... and the accidents your company experiences this policy year will still factor into your ex mod for your policy in 2011, 2012 and 2013.
How can you lower your ex mod?
We want to emphasize this important point... The decisions you make have a significant impact on your ex mod.
The next step is probably obvious... you must make safety a priority. By improving workplace safety, you can help lower the chance of injury or illness in your workplace. Over time, this reduction in claims can lead to a lower ex mod. Here are a variety of tools and resources you can use:
Safety program evaluation and development: Use this helpful template to evaluate your current safety program and practices and find ways to make improvements.
Regional and online training courses: Take advantage of the wide variety of training tools and resources we offer to help policyholders take an active role in managing and controlling their workers' compensation costs.
Multilingual, industry-specific safety bulletins: Share safety bulletins with your employees that offer content geared specifically for your type of business.
A monthly health and wellness e-newsletter: Help promote the benefits of a healthy lifestyle for your employees! Employees who are healthy and regularly exercise are less likely to suffer a workplace injury or illness.
The Digest of Personnel Practices: Reference our how-to guidelines for recruiting, hiring and retaining employees who will help you promote a safe work environment and ultimately reduce your workers’ compensation costs.
Online Resource Library: Order or download resources from our comprehensive library of safety, fraud, and claim materials—including videos, posters, paycheck stuffers, state forms and more! (Note: ID and password required)
Of course, even in the safest workplace, accidents can still occur. The claim management services an insurance company provides will impact the ultimate cost of a claim, which is often the driving factor behind a high ex mod. When choosing an insurance company, ask how their claim management program can help you reduce your insurance costs over time. It should include strategies for accident investigation, medical cost containment, returning injured employees to work, proactively addressing claims legal issues and investigating fraudulent claims.