Want to take control of your workers’ compensation insurance costs? Take a close look at your experience modification factor. Through the experience modification factor, companies can lower their premiums by improving the safety of their working environment.While workers’ compensation coverage can be a significant expense, there are several factors that influence costs. For example, costs vary by state. Costs also vary depending on the industry and the associated risk, with different jobs being given different codes used for underwriting purposes.
In addition to cost factors previously mentioned, a company’s experience modification can also decrease or increase premium calculations.
While it’s true that the risk of a workplace injury depends partially on the job type – a construction worker is more likely to be injured on the job than a receptionist is, for example – the company itself makes a difference, as well. One company may provide a safe environment with proper training and procedures that reduce the risk of an incident, whereas another company may have a history of being lax and inconsistent in terms of safety issues. As a result, a construction worker at the former company may have a lower risk of injury than a construction worker at the latter company, even though the two workers perform the same job.
Experience modification takes this into account. In New York, the Compensation Insurance Rating Board creates modification factors for employers with annual workers compensation premiums of at least $5,000. Employers with less frequent claims than average for the industry are given a premium credit. Employers with more frequent claims than average for the industry are given a premium debit. The severity of claims is also taken into account.
As a result, companies that implement quality safety controls resulting in few injuries pay less for workers compensation coverage. On the other hand, companies that fail to keep workers safe pay more for workers compensation coverage. This means that companies can take steps to control their premium costs. It also means that companies have a strong financial incentive to keep workers safe.
To keep your experience modification factor and your New York workers’ compensation insurance rates low:
- Train, monitor and enforce safe work practices.
- Implement consistent safety procedures.
- Aim to keep both frequency and severity of claims down. Because frequency matters more than severity when determining the factor, numerous small claims will drive up costs.
- Monitor your factor.
BNC Agency is your source for workers’ compensation insurance in New York and beyond. Contact us to learn more.