For anyone owning a company, workers’ comp insurance is an inevitable necessity. But by learning how the system works, your company’s benefits managers will be able to comfortably have a handle on what you are paying for, what affects your annual premium, and how to better manage and plan for unforeseen events. Over the next few blog posts, we'll discuss five proven ways to help construction executives reduce their workers’ compensation costs. Here’s a fourth consideration:
4. Analyze your Experience Modification Factors
Most insurance buyers assume their experience modification factors are correct, but this is likely not the case. If claims remain open and injury costs escalate, reserves rise and adversely affect the employer's experience modification factor, thus increasing costs. Therefore, it is critically important to ensure that a company's modification factor is accurate.
The experience modification is made up of data provided by many different companies including payroll data from a payroll company, claims data from an insurance company and job classification data from the employer. The experience modification is the culmination of three years’ worth of data.
The modification factor is essentially what drives workers' comp premiums, so it is one of the most important areas to pay attention to. Companies need to work with an insurance agent to review its experience modification prior to the date they are required to submit payroll and loss data to the rating bureau.
Written by Nick Oates
Workers Comp Specialist