Risk & Business Magazine General Insurance Services Magazine | Page 26
Save Money by Being
Proactive in Managing Your
Workers Compensation Costs
he cost of workers
is likely to be one of your
highest expenses for your
business insurance. Yet,
many business owners are often unaware
they can take back some control and begin
managing this cost.
Let’s start with how your premiums are
calculated. Premiums are calculated by
how employees are classified, the size of
the employer’s payroll, and the company’s
Premium = Classification Rate x Payroll
(per $100) x Experience Modifier
Your Experience Modifier factor, or
MOD, is a numeric representation of your
company’s claim experience. MODs are
based on how your business compares
to others in your industry with similarly
Keeping your score less than one is the
key to managing your costs:
What produces your claim experience?
Insurance companies will examine your
loss run report, including the frequency
and dollar amount of your claims. The
longer a claim stays open, the more it will
Now I know you are asking yourself: What
can I do to help manage my costs?
Be proactive. Implement safety
improvements, eliminate work hazards,
clarify work and safety expectations,
and institute new policies for a safer
work environment. The beauty in
implementing these changes is not only
will your company be better protected
in the event of an accident but your
employees are more likely to be satisfied
and more productive. A win-win for
Employers with fewer and less severe
claims than average yield a MOD > 1.
Implement procedures for effective safety
training of new hires, to reduce the risk
of accidents, and ongoing training for
everyone. Clear, detailed job descriptions
go a long way towards reducing injuries
and may shield you, the employer, from
claims of negligence.
So how can we help you? As your risk
manager, our focus is to help manage
your risk profile.
• We help you understand and
manage your company’s Experience
Modifier factor. It is imperative you
understand it and share it with your
employees and leadership team.
Everyone can take an active part in
making a positive impact for safety.
• We can also help by reviewing
vendor contracts and certificates of
insurance to ensure proper wording
and sufficient risk protection.
Services may include reviewing hiring
practices, safety training protocols,
Here are some tips on how to “be
An average MOD is set at 1.
Employers with more claims than
average yield a MOD > 1.
lost time during a certain period
of time. Awards and recognition
make employees proud of their
accomplishments and strengthen
Establish a culture of accountability
from the top. Your behavior on
the job must establish the type
of behavior to lead to the highest
standards of safety. It starts with you.
Incentivize your employees for safe
behaviors. Offer bonuses for no