Workers' compensation insurance is a major expense for most businesses. If you're an established business, you probably already know about experience modifications (x-mods). Whether experienced or not, you should familiarize yourself with this important and potentially huge premium saving factor. Please spend a few minutes to read below about what an Experience Modification is an how it can save or cost you thousands of dollars every year.
WHAT IS AN EXPERIENCE MODIFICATION?
The Workers' Compensation Insurance Rating Bureau (WCIRB) is the agency that determines your x-mod based on your actual losses vs. your expected losses. After base rates then your x-mod is then calculated into your premium which will either lower or raise your total premium.
HOW IS AN EXPERIENCE MODIFICATION CALCULATED?
The formula is actually very complicated... For the sake of this intro session, all you really need to know for now is that if you have little or no losses your x-mod goes down. If you have high losses or frequent losses, your x-mod goes up. If you're REALLY interested and love math, read this. (I dare you!)
DOES AN X-MOD REALLY MATTER?
Yes! An experience modification matters greatly in what you will pay for workers' compensation insurance. This system was designed to reward businesses with favorable claims history and to penalize businesses with poor claim history. Though complicated, it is actually a great system that rewards businesses that are minimizing work related injuries.
WHAT DOES AN X-MOD LOOK LIKE?
The "pure modification" starts at 100. At 100 you are neither penalized or credited for experience. It is essentially the "break even point". If you have a modification at 80 you would be credited 20%. If you have a modification of 120 you would be surcharged 20%. If you have an experience modification, contact us and we will gladly locate your WCIRB Risk Summary Report and provide it to you at no cost.
HOW DO I GET AN EXPERIENCE MODIFICATION?
The WCIRB will not issue an experience modification until you have three years of experience and until your premium is at $13,000 per year (base rate). Because it is costly to aggregate loss information from carriers and calculate modifications, the WCIRB will not calculate on small accounts.
HOW DO I IMPROVE MY EXPERIENCE MODIFICATION?
Okay, so you know all about x-mods and have yours. Whether you are over 100 or under, there is always room for improvement... There are several ways to reduce claims and reduce your experience modification. Here are just a few:
- Implement a safety manual that all staff must adhere to.
- Hold routine safety meeting to discuss procedures and change as needed.
- Perform background checks for new hires to be sure they are not routine offenders of the workers' compensation insurance system. You do not want to be their next victim...
- Make sure your equipment is regularly checked and replaced if needed.
- Designate a manager as an internal loss control coordinator. Give them the classes and skills they need to help you minimize your losses.
Lastly, work with an insurance broker who understands your business and may have some of the above already available for you to utilize... Hint, hint... Contact us to learn more about workers' compensation insurance and experience modification. For extra credit, you can learn more via this link at the Workers' Compensation Insurance Rating Bureau.