E-mod. Workers comp mod. Experience mod. With so many different names and acronyms, it’s no wonder people have a hard time getting to grips with the experience modification factor. Though it may seem confusing at first, the basic principle is simple: your experience mod is a numerical representation of your company’s injury and illness record, and a report card on the safety of your business.
In Georgia, the National Council on Compensation Insurance (NCCI) is responsible for calculating this rating (known as the EMR). Insurance companies then use this grade to determine the cost of workers’ compensation insurance for your business. Still with us? If you aren’t familiar with workers’ compensation insurance, please first check out this article for a more in-depth explanation. If you’re ready to learn more about experience modification factors and how they’re calculated, let’s continue!
“How is my experience mod calculated?”
In a nutshell, your experience mod is calculated by taking the past three years of your claims history and comparing it to industry averages. If your actual claims match your expected claims (based on the size of your company and the nature of its work), your experience mod will be 1.0. This score represents the industry average for each ‘class’ of business – from low-risk occupations like accountancy and finance to high-risk occupations like logging and construction.
If, however, your actual claims are lower than your expected claims, your experience mod will be below 1.0. This is great news for business owners, as it opens you up to premium discounts and reduces the amount you will pay for workers’ comp insurance each year. As a general rule, companies with lower risk – or those that demonstrate excellent employee safety and proper claims management – are the ones who are rewarded with lower insurance premiums.
Of course, this means businesses with poor safety records can be stung by increased premiums and even exclusions to cover the perceived risks they pose. Take this example: If your insurance premium was set at $100,000 per year, an experience mod of 0.8 would lower the final cost to $80,000, while a rating of 1.2 would inflate it to $120,000. Leveraging your experience mod is therefore one of the best ways to manage the cost of your workers’ comp insurance.
“How can I improve my experience mod?”
Insurance carriers understand that accidents can happen in any workplace. Likewise, they appreciate that employee illness cannot usually be helped or prevented. Injuries and illnesses are simply a fact of life, and carriers are well-prepared to cover losses and expenses when they occur. However, when it comes to e-mod calculations, the frequency of claims carries more weight than the severity, meaning businesses that exhibit ‘systemic’ safety failures are much more likely to be penalized.
As a result, ensuring a safe working environment for your employees is the first and foremost way to lower your EMR and reduce the cost of workers’ comp insurance. Failure to do so may prove to be a costly mistake, as an increased mod rate can stick with your business for up to 3 years! Thankfully, there are a number of additional steps that can be taken to improve your e-mod and positively influence work comp costs:
✔️ Create a comprehensive safety program: Though accidents cannot be prevented with certainty, carefully drafted safety protocols can significantly reduce the frequency and severity of injuries. Make sure to continuously train employees to keep them up-to-date with the latest developments and practices to get the best results.
✔️ Track near-misses as well as accidents: Most claims could be avoided altogether if businesses were more diligent about recording potential incidents rather than only those which resulted in harm. Don’t sit back and wait for a hazard to become an injury – get one step ahead and develop a streamlined process for employees to report incidents as soon as they notice them.
✔️ Invest in a robust return-to-work scheme: Injured employees should be encouraged to return to work as soon as they feel comfortable doing so. Prolonged time away can drive up the e-mod, so you should seek to incentivize their return and make any provisions necessary to accommodate their new needs.
“My business is safe. What else can I do?”
Beyond safety considerations, businesses can significantly reduce the cost of their workers’ compensation premiums through an experience mod rate audit. This is where we can help. At Rentz & Rentz, we have years of experience with workers’ compensation cases and have helped hundreds of businesses regain control of their finances through experience mod rate audits. The multi-step process works to:
???? Verify the accuracy of your EMR: We will double-check all your data – looking for inaccuracies and inconsistencies – to make sure you aren’t paying too much for workers’ comp coverage.
???? Scrutinize payroll and class codes: 65% of workers’ compensation audits have errors in these areas. Our skilled auditors will make sure everything has been calculated correctly, leaving no stone unturned.
???? Perform thorough claims management: We will work to close any open-ended compensation claims reported to your carrier. Businesses often forget to resolve these themselves, inadvertently driving up their EMR when it comes time for renewal.
Our independent insurance agents have all the necessary tools to conduct a comprehensive audit for your business, and we are dedicated to providing Georgians with the best level of service. We provide a detailed assessment of your coverage needs at every step of the way and work tirelessly to get you the best possible deal. Simply falling below 1.0 doesn’t mean that is your best experience EMR possible. So why stop there? Contact us today to see how we can help you.