One of the most important costs for any business is often considered the one most out of your control — workers’ compensation insurance. You have more control than you realize. You just have to know what impacts your overall costs. With workers’ compensation, the most important factor in your premium is your experience mod.
To lower your premiums, you need to lower your experience mod. Here’s what you need to know.
What is an Experience Mod?
Experience mods, or ex-mods, are used by workers’ comp insurance companies to determine your premiums for coverage. It’s used as an indication of the risk of workplace injuries occurring in your company. Experience mods compare your company’s actual losses from workers comp claims to other companies in your industry.
An ex-mod of 1 means you have workplace injuries, accidents, and claims at about the same rate as other companies like yours. Ex-mods higher than one mean you have more accidents — and will pay higher premiums. An ex-mod lower than one means your company is safer and better than average, and so you save money.
Lowering your experience mod has a direct impact on what you pay for workers’ compensation insurance.
How to Lower Your Ex Mod
The big question on your mind is probably, “So how do I lower my ex mod?” There are multiple ways to do this, and they all work together to create real cost savings.
Lower the Cost of Claims
Accidents are going to happen, but that doesn’t mean you should overpay for a claim.
- Ask about experience rating adjustments (ERAs). When ERAs are allowed, medical-only claims are reported with a 70 percent discount. This means a $10,000 claim will be reported towards your ex-mod as a $3,000 claim.
- Consider higher deductibles. The claim amount reported as a loss by your insurer will only be what they had to pay. If your deductible is $5,000, a $7,500 claim will be reported as $2,500.
- Remember not all accidents require a trip to the doctor. Work with a medical professional, like a telephonic doctor or nurse, to determine if an accident requires a trip to a doctor or if self-care can safely be administered. This could eliminate nearly the entire cost of a workers’ comp claim.
Watch Your Primary Threshold
Your company’s primary threshold may not be something you immediately think about with your workers’ comp insurance, but you should. Every business has one, and it’s based on your class of business and the amount of your payroll over a three-year period. The primary threshold is a dollar amount per claim where the maximum amount of points can be factored into your experience mod.
For example: You have a workers’ comp claim that’s worth $50,000, but your primary threshold is $35,000. Once you reach the $35,000 limit, you’re getting the maximum amount of points for the claim regardless of how much higher the claim may be.
Some claims may appear to be calculated to pay out $50,000 but focus on how much is actually paid out. If only $25,000 is paid, you don’t want to be penalized for the full $35,000 of your primary threshold. Ex mods are based on actual losses by the insurance company — what they actually paid for a claim. Make sure you get the benefit of the actual amount paid for a claim which could reduce the points applied towards your ex-mod calculation.
You can’t control who gets hurt when, but you may have more control over the losses from a claim than you realize. Pay attention to the numbers and do what you can to decrease the cost of a claim, and you’ll have a real impact on your experience mod and the cost of your workers compensation premiums.
Contact Charlotte Insurance for all your business insurance needs, including workers’ comp coverage.