Proper safety is at the core of an efficient and profitable operation. Ensuring your employees, your customers and your visitors are in a safe environment doesn’t have to be complicated, but it does take advanced planning and solid communication.
In this article, we’re focusing on the Experience Modification Factor, how it’s calculated and how it affects insurance premiums.
Your company’s Experience Modification Factor (Experience Mod) compares your workers’ compensation claims experience to other employers of similar size operating in the same type of business. It is calculated by the National Council on Compensation Insurance (NCCI) or in some states, by an independent agency.
“If you are at the industry average, your Experience Mod is a 1.0. If your experience is 20 percent better than average, your Experience Mod would be an .80. Or if it is 20 percent worse, your Experience Mod would be 1.20,” explains Jill Hoffmann, senior loss control consultant at Hortica®, a brand of the Sentry Insurance Group.
Typically, a company receives an Experience Mod rating sheet each year prior to the policy renewal date.
“If your renewal date is Jan. 1, 2016, your Experience Mod will be calculated from your losses in 2012, 2013, and 2014,” Hoffmann adds.
Improving the Experience Mod rating
Since the Experience Mod correlates to workers’ comp claims, your rating is likely to improve if you’re working diligently to promote safety. You can control your Experience Mod by establishing an effective safety program, Hoffmann says.
“A successful safety program can reduce injury and illness costs by 20 to 40 percent,” she says. “The cost of injury prevention is much less than the cost of an injury.”
Another way to control an Experience Mod is to create an accident investigation plan and implement corrective actions.
“Have a plan in place regarding how to handle an accident before the accident occurs,” she says.
Some of the basics of an accident plan include:
- Identify who should be notified.
- Identify who will conduct accident investigations.
- Identify who receives the accident reports and who acts on those reports.
Other ways to improve the Experience Mod are to report claims promptly, have an active claims management program, and implement a return-to-work (RTW) program, Hoffmann adds. A RTW program assists an employee in returning to work as soon as it is medically feasible after an injury or illness.
Experience Mods and insurance rates
By implementing some of the ideas provided here, you’re likely to have a lower-than-average Experience Mod, which can lower your insurance rate.
Manual Premium: $62,106
Experience Modifier: .73
Discount/Surcharge: $16,769 discount
Modified Premium: $45,337
Experience Modifier: 1.00
Modified Premium: $62,106
Experience Modifier: 1.43
Discount/Surcharge: $26,706 Surcharge
Modified Premium: $88,812