When you think of worker’s compensation insurance, chances are you picture it as just cost of doing business, a necessary evil if you will-especially if you have employees. But what if I told you there’s a way to drastically lower those premiums? Enter the experience modification mod audit.
Workers’ compensation experience mod audit by an insurance agent is just what your business needs. It’s not about running numbers, nor is it solely about paperwork. It’s about active risk management, enhancement of safety, and, thereby, lower premiums. Throughout this article, we will look into what makes having an agent performing an experience mod audit a business-saver and one great way to help you save some money.
What is an Experience Mod and Why Does it Matter?
Before getting into the benefits of an audit, we should take a step back and explain just what experience mod is, and why it is such a big deal. Experience modification rate refers to one of the factors insurance companies use to determine how much you pay for workers’ compensation insurance. It’s a numeric representation, comparative to your industry average, of your company’s claim history.
A 1.0 mod means that your firm is average regarding claims history and losses.
A mod below 1.0 means you are performing above average and can qualify for lower premiums.
A mod over 1.0 means you have more claims or losses than your peers in your industry, and your insurance will probably cost more.
It pays to reduce your mod, even just a little, to make some pretty substantial changes to insurance costs. Thousands, and sometimes tens of thousands of dollars, differentiate premiums between a 0.90 mod and a 1.10 mod. Therefore, it’s very important to make sure the mod is correct, equitable, and, for that matter, optimized for your business.
Advantages of Having an Agent Conduct an Experience Mod Audit
1. Catch Costly Mistakes and Misclassifications
One of the immediate benefits to an experience mod audit is the identification of errors in your workers’ compensation data. It’s quite common for mistakes to slip through the cracks-whether it’s an error in payroll classification, claims that were reported incorrectly, or the reserves on open claims are higher than necessary.
Suppose your business is in construction, but your employees are misclassified under a riskier subcategory. That could be inflating your premiums. An experienced agent will go line by line through the mod report and view each classification to make sure everything is correct. Many times, this alone saves your business thousands of dollars.
In fact, one landscaping client I worked with was able to save over $4,700 on their workers’ comp premiums after we identified a payroll misclassification during an experience mod audit. These sorts of errors occur a whole lot more often than you may think, and if not thoroughly reviewed, can continue to cost your business money year after year.
- Reduce Your Premiums by Reducing Claim Reserves
This is a very complex area and usually quite confusing for most business owners to deal with. If a workers’ compensation claim does come up, the insurance company opens an amount of money that is typically known as the reserve to pay for the estimated costs associated with such a claim. The catch is: reserves are not always correct, and sometimes they may be set way too high.
If reserves remain inflated, they will artificially inflate your experience mod-and with it, your workers’ comp premiums-unnecessarily. That is where an audit by a knowledgeable agent really pays dividends. A good agent will be able to negotiate with the adjusters and make the case for lower reserves when the employee’s recovery is going better than anticipated, or if certain treatments-such as surgery-are no longer needed.
I have one HVAC client who had a problem with claims frequency. In performing the audit, we identified one claim that was set with a reserve amount far higher than it should have been. The employee wasn’t going to need surgery as anticipated. We called the adjuster, and after discussing this further, he agreed to lower the reserve. Translated, this turned into an experience mod reduction of .20 points, which saved the company 20% on their workers’ comp premiums.
3. Find Out Trends and take proactive safety measures
An experience mod audit is not all about looking backward; it is also about looking ahead. Your agent may be able to find a pattern or trend that could explain your higher premiums after a thorough review of your past claims and mod calculations.
For instance, if your mod has been trending upward over the last few years due to repeated slip-and-fall injuries, that is a sign that something in your safety protocols should be changed. An agent who performs an audit will bring these issues to light for you, and he can help institute proactive steps such as:
Better safety training
New Safety equipment or procedures
Return-to-work programs
By addressing these issues now, you’re not only lowering the likelihood of future claims, but you’re also positioning your business to potentially lower your experience mod in the future. An effective safety plan and reduced claims frequency can significantly reduce your workers’ comp costs over time.
4. Maximize the Value of Your Experience Mod
Not all experience mods are created equal, not even when they’re accurate. Often, businesses simply are not using their mod as fully as they could realize the savings their mod may afford them. This is where your agent steps in: a good agent won’t just audit the mod; a good agent will make recommendations on how to leverage that mod to better rates once it’s time to renew your workers’ comp policy.
Your agent might refer you to other insurance markets that will be more receptive to your mod or business type. They’ll bring carrier options to you that fit your company’s risk profile, whereby you could shop for a better rate. Basically, an experience mod audit optimizes the value of your mod in order for you to have the best deal possible for your insurance. 5. Ongoing Monitoring and Support
Of course, this is not the end after the preliminary audit. A good agent will keep monitoring your mod and providing ongoing support, which also means timely reviews and updates when new claims arise or old ones close.
Ongoing monitoring ensures that any new issues are addressed quickly before they can have a negative impact on your mod. It also helps keep your business on track with safety improvements and claim management, so you’re always working toward lowering your workers’ comp costs.
At Safenet Insurance Group, we take that ongoing support seriously. We provide regular updates for our clients, along with training sessions and individualized safety programs to help keep that mod solid and the workers’ compensation premiums in line. 6. Peace of Mind The best thing that could be derived from having an agent conduct an experience mod audit is peace of mind. Workers’ compensation insurance is overwhelming and confusing in itself; now, try to run a business while also trying to figure it out. By pairing up with an experienced agent, you’re not only going to make sure that your mod is accurate and optimized; you’ll be freeing up your time to do what you do best: running your business. An agent who knows the inside track on workers’ compensation takes the burden off your shoulders and allows you to feel confident your insurance works for you instead of against you. Conclusion The experience mod audit is not just an exercise in finance, but a strategic move that might protect your business and help to improve your bottom line. A few of the benefits vary from identifying costly mistakes to bringing down reserves and enhanced safety practices. By revealing the hidden savings, the agent performing the experience mod audit will save you more money, reduce workers’ compensation premiums, and will leave you feeling confident that your insurance is in good hands. What every business owner wants at the end of the day is to have confidence that they are paying the right price for insurance-not too much, but what is fair. With an experience mod audit, you will rest assured that your workers’ comp premiums reflect your business’ true risk and safety profile-and that you’re doing everything possible to keep those costs down.