Your clients can achieve lower workers’ comp rates. Here’s how.
- Work comp premiums are calculated using classification codes, total amount of payroll per class, schedule rating and ex-mods.
- Ex-mods are an insured’s last three years of claims experience.
- View six ways your insurance client can lower their worker’s comp rates.
Prices are up, inflation is taking its toll and your clients are looking for ways to cut expenses. The good news is that they can achieve lower workers’ comp rates by lowering their experience modifiers, or ex-mods. Bear in mind that premiums are calculated using several primary factors: the rate as filed by the carrier per classification code; the total amount of payroll for each class; schedule rating, if warranted; and the client’s ex-mods, if the insured qualifies. Other factors may also apply, such as territory factors, premium discount factors and possible filed group discounts.
Related: 8 Workers’ Compensation Trends Affecting Your Clients
Ex-mods represent the insureds’ claims experience using a three-year timeframe (excluding the expiring term) and are based on a comparison with other companies in the same state having the same applicable classification codes.
“If your client has lower-than-average work comp claims, and they qualify for an experience mod rating, they’ll experience a lower ex-mod which can contribute to lower premiums,” explains Becky Pinto, president of Arrowhead Workers’ Compensation. “The converse is true too, unfortunately: If their claims are higher than the average, their ex-mods and likely their premiums will be higher.”
However, there are ways insureds can improve their ex-mods and lower their premiums. Here’s how:
1. Know their rating period
As their broker, help them understand the length of their rating period and the precise time period it covers. Is it a short-term or annual policy? Or is it the three-year period used to calculate their ex-mod? This knowledge allows your client to identify the claims within that rating period and work towards lowering their ex-mods.
2. Mitigate workplace hazards
The Occupational Safety and Health Administration requires companies to have a “competent person” to identify and correct site hazards. Even if your client isn’t in a regulated industry, it’s beneficial to have someone skilled in finding and fixing potential hazards, from frayed carpets to improperly stored chemicals. These individuals should also track employee injuries, perform incident analyses and maintain OSHA 300 logs.
3. Enforce compliance
Whether their workforce is large enough to recruit a safety training officer or not, it’s crucial that management and employees understand OSHA safety regulations as well as state and local laws to reduce workers’ compensation injuries, which can contribute to lower ex-mods. Regulations may include labeling of hazardous materials, equipment certification and emergency planning.
Related: How faster workers’ compensation claim reporting can reduce costs
“Training and educating employees regarding safety and proper use of equipment will help prevent accidents,” Pinto says. Following a specific protocol for all accidents ensures timely incident reporting and prevention of future injuries. Overall, a safety-centric culture can decrease claim frequency and severity.
4. Emphasize safety training
Work with your clients to highlight safety training during employee onboarding and at regular intervals throughout the year. Help them establish employee health and safety (EHS) targets, strategies and timelines, and assist them in meeting their goals. Numerous training programs and software are available to share with your clients, including Arrowhead safety training materials. Contact your business development specialist for details.
Related: Are you at risk for small business work comp fraud?
5. Conduct regular audits and keep thorough records
Encourage your clients to regularly inspect and test their equipment and systems for potential hazards. Keeping detailed records of incidents, mitigation steps, involved individuals and completed updates is crucial for safety and lowering workers’ comp rates.
Related: Avoid these top 7 workers’ compensation claim mistakes
6. Don’t use uninsured subcontractors
If subcontractors lack their own workers’ compensation coverage, they may fall under your client’s coverage, impacting their experience and increasing work comp costs. Ensure subcontractors meet the criteria to be considered independent contractors to avoid this issue.
Ultimately, empowering your clients to lower their ex-mods and workers’ compensation premiums provides you with a great opportunity to strengthen those relationships by helping them save money and most importantly, create a safer work environment. It’s a win-win. For additional resources, check out our Workers’ Compensation Program to enhance your portfolio of insurance solutions.
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