At Arroyo, we have been helping clients understand Workers Compensation for more than three decades. Part of this involves understanding how your experience modification (ex-mod) works and the impact it has on your Workers Compensation premium. Experience rating is an integral part of determining the cost of Workers Comp, and provides a business with an incentive to manage its own expenses through measurable and meaningful cost-savings programs.
After calculating your base rate (payroll per $100 X classification rate), the insurance company will calculate your experience modification factor to determine your Workers Comp premium (payroll per $100 X classification rate X experience modification). The ex mod is unique to each employer and is expressed as a percentage that pertains to whether your loss history is below or above other employers within the same industry. Basically, the ex-mod functions as an indicator that gauges the “health” of your company.
The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) calculates the ex-mods. The agency uses your actual loss history as it has been reported to the insurance company over a three-year period. If you fall within the average range as compared to similar-size companies within your industry classification, you would typically get an experience mod of 100 and would be charged the full base rate. On the other hand, if your business has an experience mod factor of 90, you might see a 10% savings, while a business with a factor of 120 would pay 20% more.
Lowering your ex-mod begins with ensuring the data used to calculate the experience modifier is accurate. At Arroyo, we routinely perform the same experience modifier evaluation as the WCIRB in order to determine accuracy and forecast future financial impact on the premium. Inaccurate ex-mod calculations are often the result of errors in payroll amounts, inaccurate job classifications, improper claim reserves and open claims that should be closed. We’ll conduct a detailed analysis of your organization’s payroll, class codes and claim history, which will ensure the experience modifier is accurate.
Investing in a safety program that builds in proactive activities to help avoid accidents is another way to improve your claims experience and ultimately how your business is rated. Safety programs help to lower your premiums over time, as your accidents are reduced in frequency and severity, and the risk to insure your business goes down. Arroyo can assist you with developing a safety and loss control program along with OSHA compliance through our carrier partners.
Claims management, including having comprehensive accident claims processing and investigatory procedures in place, is also critical in lowering your ex-mod. We’ll work with you to report claims properly and to have employee injuries treated immediately so they can get back to work sooner than later. We’ll review loss runs for similar types of claims to help make changes to your processes to reduce the frequency of claims. We can also help you implement an ongoing claims management program to manage outstanding reserves and focus on efficiently closing open claims.
Improving your loss experience will improve your experience modification factor, which will reduce your premiums. We’re here to help you.