Injuries in the workplace directly impact the cost of a company’s workers’ compensation insurance. When a company has losses it will affect the Experience Modification Factor (EMod) used to determine insurance premiums. Below is an example of a company whose losses have given the company a current EMod of 1.22. When a company is Loss Free, the company will have what is known as the Minimum Mod as seen on the chart.
The average company in this example’s business would be paying $114,424 as illustrated by the 1.00 Mod Value, which represents the average for all companies of this type. With a 1.22 Current Mod Value, they are instead paying $139,597 per year. If they had been Loss Free, their Mod Value would have dropped to the lowest it could go based on their current payroll and rates, and would be 0.61. This would reduce their annual premiums to $69,799. The ANNUAL SAVINGS for such a business would be $69,799.
Reducing work-related losses not only reduces the workers’ compensation insurance annual premiums, but also eliminates the indirect costs associated with losses. These savings can often be greater than the premium savings.