In Rhode Island, workers’ compensation insurance uses three factors to calculate premiums: rate assigned to each payroll classification in your business, total amount of payroll for each classification, and your experience modification factor. The third is the only one within your control to change.
Handling your experience modification factor poorly will cost you plenty. However, handling it well can lead to lower premiums. Here’s how.
Getting employees back to work as soon as reasonably possible will have a major impact on your workers’ compensation insurance costs. Claims costs are significantly reduced when an injured worker returns to modified or light duty.
As an example, a worker hurts their back and their workers’ compensation rate is $600 per week. Physicians estimate it will take 20 weeks for a full recovery.
If the company does not have a return-to-work program or doesn’t want to accommodate the injured worker it will cost $600 x 20 weeks, or $12,000 in indemnity benefits. This amount is included in the company’s experience modification for the next three premium years.
Conversely, a mandatory return to work program would save the company $12,000 and it would not impact their experience mod. Plus the worker would offer value and returning to work may even improve their morale.
Strong Workplace Safety Program
Reducing the frequency and severity of injuries will improve your experience mod, too. Consequently, a strong safety program is vital if you want to reduce your claim’s payment history and premiums.
OSHA offers in-depth information if your company does not have a program or you need to improve it.
Many injuries don’t warrant a claim and can be handled through a nurse triage service via the telephone. Cuts, bruises, and scrapes can be managed by the company’s first aid person under their guidance, keeping insignificant injuries out of actual incurred losses.
Review Employee Classifications
Every employee in your company is assigned a classification code. However, people may change positions and administrative errors can occur. As a result, your company may pay more than necessary if the person now works in a less risky job.
For instance, a warehouse worker might be promoted to a managerial position or clerical employee might now work as a contractor.
Unit Statistical Date
This is the date used to report total incurred losses used in the calculation of your experience mod for next year. Total incurred losses include claims paid AND outstanding reserves for open claims.
Careful, ongoing reviews of claims can help better manage reserves. As an example, a worker may have a large reserve in place in anticipation of surgery. However, the medical provider no longer foresees the need for an operation. Consequently, the reserve can be reduced to reflect the new information which in turn reduces actual incurred losses, providing the adjustment is done before the unit statistical date.
Clearly, you’ll want to do everything possible to lower your experience modification factor as it leads to lower premiums. However, it will take time for you to realize the effect as carriers base calculations over three years. Nonetheless, strategies to improve workplace safety benefit everyone, even if the monetary benefits aren’t felt for some time. Looking for some other ways to save money on your business insurance? Give us a call.