What Is Business Interruption Insurance? Running a business in Des Moines requires careful planning...
Think of your Workers Compensation Experience Modifier (E-mod) as your insurance report card. As a Des Moines business owner, understanding this number can make a significant difference in your insurance costs. Let me break this down in simple terms.
What is a Workers Comp Experience Modifier?
Your Experience mod, or E-mod, is a numerical representation used by insurance companies to adjust your workers' compensation premium based on your past claims history. In Iowa, as in other states, the process begins with base rates for each type of work, known as class codes. These rates are then used by the insurance carriers to determine how much you'll pay per $100 of payroll for workers' compensation coverage.
The straightforward part is this: an E-mod of 1.0 means you're paying standard rates. A lower E-mod results in a discount, while a higher E-mod increases your premium above the standard rate.
How Your Experience Modifier Affects Your Premium
To illustrate the significance of your workers comp E mod, consider this real-world example from a West Des Moines manufacturing client:
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Standard Premium: $100,000
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E-mod: 1.25
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Final Premium: $125,000
This business owner was paying an additional $25,000 solely due to their E mod – funds that could have been reinvested in their business operations.
Why Your Experience Modifier Might Be Wrong
It's important to note that approximately 65% of E mods are calculated incorrectly. This discrepancy often stems from data inaccuracies. The National Council on Compensation Insurance (NCCI) calculates these numbers based on:
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Payroll information
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Claims history
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Reserved claim amounts
Issues arise when closed workers compensation claims aren't reported correctly or reserves aren't adjusted appropriately. This scenario is common across various businesses in the Greater Des Moines area, from small contractors to large manufacturers.
Using Your Experience Modifier to Improve Safety
Your E-mod isn't just about insurance costs – it's a valuable tool for identifying safety patterns. When working with businesses in the Des Moines Metro, we analyze E-mod data to spot trends such as:
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Departments with the highest claim frequency
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Most common types of injuries
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Job sites experiencing more incidents
This information is instrumental in creating targeted, effective safety programs.
Key E-mod Concepts
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Modification Factor: The multiplier applied to your premium based on your claims history
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Loss Ratio: The relationship between your actual losses and expected losses
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Primary Losses: The first $18,000 of each claim, which has a greater impact on your E-mod
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Excess Losses: Claim amounts over $18,000, which have a lesser impact on your E-mod
Strategies to Improve Your E-mod
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Implement Robust Safety Programs: Focus on preventing accidents before they occur
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Effective Claims Management: Promptly report and actively manage claims
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Return-to-Work Programs: Help injured employees return to work safely and quickly
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Regular E-mod Audits: Ensure accuracy in your E-mod calculation
Frequently Asked Questions
Q: How often does my E-mod change?
A: Your E-mod is recalculated annually, using the last three years of claims data (excluding the most recent year).
Q: Can I lower my E-mod?
A: Yes, through effective safety programs, claims management, and regular E-mod audits.
Q: What's considered a good E-mod?
A: Any number below 1.0 is favorable, indicating better-than-average claims experience.
Q: How do I find out my current E-mod?
A: Your insurance agent can provide this information, or we can help you obtain it.
Take Action to Optimize Your E-mod
At DSMIG, we specialize in helping Des Moines metro businesses understand and improve their Experience Modifiers. Our team offers free E-mod analyses to audit for accuracy and identify opportunities for improvement.
Don't let an inaccurate or high E-mod drain your business's resources. Contact DSMIG today for a detailed analysis of your Experience Modifier. We'll show you exactly how much you could save and create a tailored plan to make it happen, ensuring your workers' compensation costs accurately reflect your company's safety performance.
