You might not have heard of experience modification or ExMod. Essentially, after a few years of maintaining your workers' compensation annual premiums, a factor is applied to your business. This factor has a status quo that is considered to be 1.0. If there are workers' compensation claims, your ExMod factor goes up, resulting in a 'debit MOD.' If there are no losses, the number can decrease slowly resulting in a 'credit MOD.' The process will be discussed in more detail below.
Businesses with safe workplaces may encounter an experience modifier or a better-than-average correlation between their workplace injury loss and workers' compensation expenditures. Companies with lesser risk typically pay a lower premium, which is determined by the experience modifiers used by insurance companies to calculate the cost of workers' compensation premiums.
The experience modifier is converted by insurance companies into a number or experience modification rate (EMR). As explained above, this figure is based on the historical cost of injuries for your business and potential future risks. The average losses from other employers in your state in the same industry are then compared to a company's EMR. The final rate is predicated on the idea that past losses foretell future losses. The standard in the sector is an EMR of 1.0. Your workers' compensation will be less if your company has a lower EMR. The EMR must be more than 1.0 in order for premium rates to be higher.
A company's experience modification can be lowered if it has a strong workplace safety program in place. Programs for workplace safety assist in removing risks from the workplace and lowering employee accidents and injuries. According to the Occupational Safety and Health Administration (OSHA), firms that implement employee safety programs can cut expenses associated with accidents and illnesses at work by up to 40%. EMR may be decreased for businesses that establish a return to work program.
Employers who uphold safety policies and laws offer safety education, training, and occupational health initiatives to foster a work climate where employees feel secure reporting to work. Employee loyalty to the company is increased when they feel comfortable at work.
A safety committee or a risk management specialist should carry out a risk assessment. Your internal safety committee should be composed of two managers and two more employees, according to the Occupational Safety and Health Administration (OSHA).
The goal is to search for anything that can endanger your personnel, such as tripping hazards or slippery floor surfaces. Risks will fluctuate based on the workplace, for example, manufacturing versus office work. This creates the framework for a workplace safety plan by identifying potential risks and hazards.
A company can better position itself to meet its goals for workplace safety by developing an action plan for dealing with these dangers. The action plan needs to be specific to your workplace and in line with the threats that the hazard assessment highlighted. The strategy is straightforward: identify the issue or risk and offer a remedy. The management of the action plan and ensuring that it is effectively implemented should fall under the purview of the safety committee.
Any program should include instructions on how to follow loss control policies for staff. This will make it easier to guarantee that your staff members prioritize safety and are aware of potential hazards at work. An overall safety system can benefit from improved communication. It will be helpful to your staff if you incorporate reminders about workplace safety.
A crucial component of any program to promote workplace safety is keeping accurate and thorough records. Additionally, it is required to meet OSHA and other legal standards. In addition to keeping track of the outcomes of any safety inspections or insurance audits, it fosters responsibility and efficient corporate management. Additionally, it's a sort of loss control in and of itself, allowing a company to draw lessons from the past, spot prospective problems in the future, and eventually aid in loss prevention.
Another step in creating a sound safety plan is to include loss control in the workplace, not just as an assessment that happens once in a while. A safe workplace for all employees should be the objective of a company. This can lower insurance costs and keep your workplace productive and healthy.
The experience mod's latency between the incident and its impact is its most unexpected feature. Because the calculations are based on a three-year rolling average and do not include the most recently completed policy year, the effects of an accident or injury won't be seen right away. This indicates that each occurrence has a three-year impact on your insurance prices before it disappears. The claim amount could be revised throughout the course of these three years to reflect the current cost of insurance. Therefore, throughout the three years that the incident is included in your experience mod calculations, rates based on that long-ago accident may climb.
Understanding experience modification can be overwhelming, especially at first. If you can focus on a safe workplace environment, it might be beneficial for you in the long run. It's more of an added benefit if you get to that point. It's good to know what it is, though.
Kickstand Insurance helps employers create a safe work environment in an effort to lower their Experience Modification. Other than the tips above, we encourage regular safety meetings for employees as well. Doing everything you can to keep your employees safe is key to lowering your ExMod and insurance premium.
Do you have any questions about your ExMod and how you can lower it? We’re happy to help. You can either start an instant quote on our site so we have all the information about your policy to help you or or you can call us directly at 866-338-8823.
Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.