Insurance is an industry that is built on the bedrock of risk mitigation and management. Insurance providers invest heavily in tools that help them assess and mitigate risks to limit losses so they can continue to provide invaluable services to businesses, like yours, while remaining in business themselves.
One such tool is known as an experience modifier or experience modification factor. This tool allows insurance companies to evaluate your business in order to assess the risks they will take on when your business turns to them for workers' compensation insurance. Here is what you need to know about an e-mod and the steps your business can take to enjoy more favorable experience modifiers.
What is an E-Mod?
Short for experience modifier or experience modification factor, an E-mod is a numerical representation of the injury and illness record of your company. Ultimately, it serves as a type of report card regarding the safety of your business. That’s the short explanation. The more complex answer is that your E-mod is the rating factor insurance providers use to determine premiums based on the losses your business has accumulated within a certain timeframe compared to the industry-wide expectations during that same time.
E-mod benefits everyone because it provides employers, like you, the ability to manage expenses through measurable and meaningful cost-saving initiatives. In other words, it allows you greater control over the costs of your workers' compensation insurance by empowering you to act to reduce the need to file a workers' compensation claim within your organization by promoting safety.
How is E-Mod Calculated?
Depending on your state’s regulations, E-mods are calculated by the National Council on Compensation Insurance (NCCI) or the worker’s compensation rating bureau in your state. While each state may have some differences in the precise calculations used to determine E-mod, the following tenant is universal.
E-mod is equal to the “actual losses” of a business divided by the “expected losses” for businesses in your industry.
Businesses with a claim history that matches similar businesses typically have an E-mod of 1.0. Those with an E-mod that is less than 1.0 have better claims records than industry peers and those with an E-mod that is greater than 1.0 have a worse history than competitors within the industry.
How Can I Improve My E-Mod?
Accidents happen in workplaces in every industry. There is no such thing as an accident or an injury-free workplace. That being said, there are things businesses can do to mitigate risks and reduce the frequency of accidents.
What sets E-mod apart from other calculation tools is that it prioritizes the frequency of claims over claim severity. What this means for businesses is that a pattern of claims indicating “systemic” safety failures are more likely to suffer penalties than those that have a single, albeit devastating, accident or injury.
In other words, businesses that show a greater commitment to reducing E-mods are more likely to enjoy more favorable outcomes if they make the following types of investments in workplace safety.
- Provide sufficient and frequent safety training to employees. Offer continuing safety education and training throughout each employee’s tenure.
- Create a system of accountability within your organization. Make everyone a partner in safety.
- Prioritize a culture of safety within your organization and take proactive steps to improve safety.
- Maintain a record of all your actions to make your workplace safer and the results or outcomes of those actions.
As an employer, it will greatly improve the cost of workers' compensation premiums to lower your experience modifier. The actions above can go a long way toward promoting safety in your workplace. Especially when you have a direct and escalating system of accountability for safety infractions within your organization.
Why Do I Need to Improve My E-Mod?
Since your E-mod plays such a massive role in determining the workers' compensation premiums for your business based on your workers' compensation claim history, it is in your best interest to take decisive action that involves multiple positive changes within your organization. This is especially the case if your current E-mod is greater than 1.0 due to a history of multiple accidents and employee injuries.
Reducing this number needs to be a priority if you hope to have affordable insurance options available to you. Workers' compensation insurance isn’t an option for most businesses today. If you have employees, this insurance is essential coverage that is often required by law. While you want to provide the best possible protection to your employees, you also do not want to have to pay more than is absolutely necessary for the privilege. Keeping your E-mod low is the best way to accomplish that goal.
In The End
At Arnold Insurance, we are your neighbors and your partners in business. Our mission is to help businesses find new ways to mitigate risks, reduce accidents, and ensure you have the insurance coverage and protection you need in place when accidents and injuries occur.
With rising costs at every turn, the need to reduce costs and lower expenses without sacrificing safety or productivity is greater than ever. We are here to help you find the right insurance protection to meet your needs without breaking your budget. Contact Arnold Insurance today to learn more about E-mod and how to get effective and robust workers' compensation protection for your employees.