If you’ve ever tried to read the fine print in a workers compensation insurance agreement, you’re aware of why many companies are not well versed in how it functions. As Edward J. Priz of Advanced Insurance Management puts it, “If you have a high tolerance for technical and obtuse language, try reading the fine print of your workers’ compensation insurance policy.”
But avoidance isn’t a useful strategy in business and workers compensation premiums are a cost that all business owners with employees have to manage. Of course, there are large companies that self-insure but they have to deal with the same issues in order to keep costs to a minimum.
One thing is clear from numerous studies however; a healthy workforce has fewer claims and a much shorter recovery time before they’re back to work. This is one of the main reasons why employee health, wellness, and injury prevention programs are on the rise in American companies.
Experience Modification Factor
The Experience Modification Factor (EMF) is what drives the cost of your workers compensation insurance. The EMF is calculated by comparing your last three years of claims and comparing it to the average in your company’s class. If you have a higher number of claims than average, you pay a premium on the workers comp rate. Alternatively, if your company is below the average, you receive a discount.
The key to saving money therefore, is illness and injury prevention. It’ll take a couple of years to start to see real savings as you replace a year of high claims to one of low claims due to the 3-year average.
7 Ways to lower your experience modification factor:
- Make sure your EMF rating is correct. Your EMF is calculated based on data provided by past insurers. If the data is incorrect, so too will your EMF.
- Develop a proactive safety program. Illness and injury prevention is key to securing a discounted workers compensation premium. Employee safety committees, behavior-based safety (BBS), training and awareness campaigns, and safety performance goals for supervisory roles are some of the more common routes businesses take to reduce workers compensation costs.
- Establish a health and wellness program. A healthy workforce has lower absenteeism and lost-time illnesses. A number of small, frequent workers compensation claims due to workplace illness increases premiums more than one large claim. Insurers look at small, frequent claims as the result of a poor occupational safety program.
- Develop an injury prevention program. From workers compensation increases to healthcare and rehabilitation costs, occupational injuries cost money and lots of it. Ergonomic injuries, for example, can cost a company up to $30,000 and more in healthcare costs. Musculoskeletal disorders (MSDs) account for more than a third of all workplace injuries.
- Establish an in-house rehabilitation program. The longer workers are off the job, the higher the workers compensation premiums rise. On-site rehabilitation can not only get workers back on the job quicker, it saves on both workers comp and healthcare costs.
- Investigate accidents thoroughly and impartially. When an accident or injury occurs, investigate the causes thoroughly and utilize it as teaching tool for other employees. As mentioned, the lower the claims, the lower the premiums become.
- Utilize pre-employment testing tools. Ergonomic bio-metric testing will help insure that potential employees meet the physical requirements of the job. Additionally, pre-employment testing can identify candidates that may be potential workers compensation claimants.
Client Case Studies
For examples of how our illness and injury prevention programs stabilize then reduce workers compensation premiums, please visit the Case Studies page on the InjuryFree website. There you will find how, “This 285-person safety supply manufacturer struggled for 30 years with a high employee injury rate. Prior to its acquisition by a Fortune 500 company, it experienced 9 to 15 workplace injuries per year. The injury rate per hundred employees was 5.69. Most of the injuries were ergonomic related and total costs for injury claims ran about $650,000 per year.”