How To Control Your Company's Workers Comp Premiums | Workers Comp Series | #2

Something that most business owners and executives aren't aware of is the fact that Workers Compensation Insurance is one of the only types of insurance where employers have a direct control over the premiums they pay. Yes, you read that correctly. But why is that? There are a few different reasons but the main reason is because of the experience modification factor, or E-Mod. 

What is an Experience Modification Factor and How Does It Work?

An E-Mod works as a surcharge or credit mechanism with workers comp policies. The actual calculation is pretty tricky, but here are the main things to know:

• The E-Mod is calculated to adjust your total workers comp premiums based on how your company's claim history matches up with others in your industry. 
• For example, the average company (from a claims paid perspective) for a given industry will have a 1.0 E-Mod. This means that if their workers comp premium is $10,000, then their actual premium would be $10,000 x 1.0 = $10,000
• A company in a given industry that has had more paid-out in claims than the average company in that industry may have an E-Mod of 1.5, which translates to paying 50% more than the average company in their industry for workers comp. In the same $10,000 example: $10,000 x 1.5 = $15,000. 
• A company in a given industry that has had very few claims paid out may have an E-Mod of 0.8, meaning they will pay 20% less than the average company in their industry. Using the same $10,000 example: $10,000 x 0.8 = $8,000

So How Can Your Business Take Control of Your Experience Modification Factor?

There are 2 main ways that companies can positively impact their E-Mod and their premiums:

• Implementing controls and risk management strategies to reduce the frequency and severity of claims. 
  • This would include implementing a Return To Work program, added safety training, defensive driver training, employee safety incentives, updated employee handbook and safety manual, and more. These are things that we work with our clients to implement so that they can lower their premiums long-term and increase their company's productivity. 
• Superior claim management practices
  • When claims do arise, it is important that they are being managed properly and closed out as quickly as possible. From there, it is important to work with your advisor to analyze the premium impact of the claim. We use software to analyze how each claim impacts the future premiums for our clients. In many situations, it makes sense to pay some (or all) of the claim out of pocket. It all depends on which coverages are being paid and how much. If there are small indemnity losses (even with a Return To Work program in place), most of the time it makes sense to pay that out of pocket because it significantly reduces how much of a claim pay out is reported to NCCI. 

If you have questions on how to take control of your workers compensation premiums or want to know how much a particular claim is impacting your company's premium, click below and we'd love to help!

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​The Roberts Insurance Group is a Georgia Insurance Broker specializing in commercial and personal insurance for our clients throughout the state of Georgia. We help our clients lower their cost of insurance with our superior claim and risk management expertise and our extensive carrier access. We are in the business of building relationships with our clients to help them grow and succeed. Contact us today to see what we can do for your family or business.