Experience Modification Rate
If you are a business owner and want to save money on workers’ compensation, then it is time to start thinking about the experience modification rate. The experience modifier is defined as “the ratio of injury losses (expressed as average weekly wage) for an employer’s occupation group divided by Workers Compensation costs.” In simple terms, this means that businesses who have safe workplaces could see their actual loss be better than average.
This is because insurance companies use the experience modifiers to help determine workers’ compensation premium costs, and businesses with lower risk will generally have a lower premium. For example, if an employer has 100 employees who work in construction related jobs, they could expect their actual loss be around $4000 per week for this same period of time. Workers’ comp insurers can then compare that amount to other employers within your state or region whose losses are similar even though each company has different numbers of people working at any given moment throughout the year. This makes it easier for them to set rates since they do not need as much detail about individual workplaces when comparing premiums between groups like these.
By using historical information from previous years on how many injuries occurred (and how much they cost) for each group of employees, insurers can make a good guess on how many injuries will occur in the future. They often use the term “Workers Compensation frequency” to describe this information.
Now that you have an understanding about what experience modification rate is, it’s time to think about what all of this means for your business moving forward into 2021 and beyond. While no one has 100% accurate crystal ball when predicting things like these, there are some trends that seem pretty clear now which might help explain why workers’ compensation rates continue increasing so quickly year after year even though fewer people are actually being injured at work overall. These include: more pre-existing conditions covered by insurance companies (thanks Obamacare), higher legal defense costs for employers, and the fact that more states are requiring use of electronic record keeping systems which slow down claim processing.
