Understanding the Driver of Your Workers' Compensation Premium Expense

Published in Member Communities on March 10, 2023

Jim Nygren, President, VGM Insurance Services

With workers’ compensation premiums being one of your largest insurance related expenses, it’s critical to understand how these premiums are calculated and what you can do to better manage this expense. In this article, we will discuss the Workers’ Compensation Experience Modification and how this factor impacts your premiums.

What Is the Workers’ Compensation Experience Modification?

The Workers’ Compensation Experience Modification is a rating factor that looks at three years of Workers’ Compensation history at a time. It’s based on how your claim history compares to other businesses of similar size and type of employees. 

It may be a single number, but it can have a big impact on your premiums. Here’s what it looks like in practice. A Workers’ Comp experience mod of 1.0 represents the industry average. If your business has had greater than average risk, your mod would be greater than 1.0, thus resulting in a higher premium. Conversely, if your business has been performing better than expected from a risk standpoint, your mod would be less than 1.0, saving you money on your premium.

For example, say the average premium in your industry is $100,000 and your business has done a great job controlling its Workers’ Compensation risks, resulting in a mod of .75. Your adjusted premium would then be $75,000.

What Can I Do to Control My Experience Modification?

Now that we’ve looked at what the Workers’ Compensation Experience Modification is and how much of an impact it can have on your premium, let’s look at how you can control it. Here are five steps you can take in your business to get your mod under control:

5 Steps to Controlling Your Experience Modification

1. Self-inspect your workspaces or have an outside source conduct an inspection.
2. Develop a safety program, educate employees on expectations and their responsibilities for safety, and document both. 
3. Be sure to investigate accidents immediately and thoroughly. 
4. Report all claims to your carrier right away, and bring any serious, potentially serious, or suspect claims to their attention.
5. Take an aggressive approach to providing light duty to all injured employees upon their release from treatment and returning to work. 

How Do I Get Started?

It’s difficult to eliminate all the potential exposures workers face while providing valuable services to your patients. However, with proper planning and management, you can significantly reduce these risks, and more importantly, keep your employees safe.

There’s a lot to take in and consider. But, controlling your Workers’ Compensation Experience Mod, and therefore your premium spend, really comes down to good risk management practices and working with a partner who understands your unique risks.

At VGM Insurance, we have developed a proprietary Workers’ Compensation product specifically designed for the DMEPOS industry. To learn how VGM can help you reduce the risk of injury for your employees, reach out to your VGM Insurance Services account manager or contact us today at info@vgminsurance.com or 866-275-9531.

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This article was originally featured in the VGM Playbook: Forecasting 2023. To read the full article and more like this, download your copy of the playbook today! 

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