By Bill Tricarico
Senior Risk Management Consultant
McNeil & Company, Inc.
I’ll bet you know exactly how many responses your agency provided last year. And the exact cost of a new ladder truck or an ambulance, and your average response time. Emergency services have lots of numbers to be concerned with, but there is one number you really should be aware of. Your organization’s Workers Compensation Experience Modification Factor (Exp. Mod.). Now before your eyes glaze over and you stop reading this article, how would you like to be able to compare your organization’s injury rate to others? I hope that got you back, because that’s one of the things your Experience Mod. does. If you don’t know your organization’s Exp. Mod., don’t feel bad. Most people don’t even know what their Exp. Mod. represents.
Experience rating was created by state regulators to encourage workplace safety. The experience modifier adjusts workers compensation insurance premiums based on a comparison of your organization’s past losses to what is calculated to be “average” losses of similar operations in your state, adjusted for size. (Actual Losses/Expected Losses = Experience Modification) The “average” organization would have an Exp. Mod. of 1.0. An organization with an Exp. Mod. over 1.0 would receive a surcharge to the annual workers compensation premium equal to the amount over 1.0. An Exp. Mod. of less than 1.0 would result in credits of equal amounts. The “experience rating” period is three policy years, excluding the most recent policy year so emphasis placed on safety today will potentially impact workers compensation insurance premiums for a number of years.
Your insurance agent or workers compensation carrier can provide your current number, but more than knowing the number itself is what you do with it. If it is above 1.0 you need to explore what drove the number up and then work on those issues to reduce the number in the future with a good risk management plan. Your insurance company should be able to help.
The number does not only impact your workers compensation premium. Injuries cost far more than what is paid by your insurance company. The hidden costs may include loss of trained individuals which could increase your liability from operating poorly or increased chances of vehicle accidents. Injuries could also affect recruitment and retention. Of course the most important factor is making your members safer by reducing exposure to risk.
Your Experience Modification Factor may be one of the most important numbers to your organization. Find out what it is and then work on making it lower!