We left off last post with an important question to which every business owner should know the answer -

What is an Experience Modification, and why should I care?

The Experience Modification (or Ex Mod) is a factor calculated by the Workers’ Compensation Insurance Rating Bureau (WCIRB) based on an individual company’s loss history. This factor, indicated by a percentage that is applied to the insurance rates, will decrease with a favorable loss history, or increase bad loss history. All companies begin with a 100% Ex Mod. So, in simple terms, the more injuries you have, the higher your Ex Mod rate, the more premium you pay. The fewer injuries, the lower your Ex Mod, the less premium you will pay.

So let us go back to our friend, Warehouse A, whom we discussed in last post. After multiple injuries, their Ex Mod jumped from 100% to 125%. So, despite writing the same cheap deal in Year Two ($92,000 of base premiums), their net premium jumped to $115,000 ($92,000 X 1.25).

IN THE MEANTIME, Warehouse B did not spend as much time as Warehouse A shopping for insurance. They ended up with the slightly more expensive deal, paying $100,000 in base premiums. However, the management of Warehouse B took safety seriously. They did not just try to satisfy the minimum OSHA requirements. Rather, they invested a few thousand dollars in new safety equipment, training videos, and incentivizing the warehouse manager to create and manage a safety plan. From their efforts they only sustained a few minor injuries over the course of the year.

The result? Their Ex Mod dropped from 100% to 82% due to their favorable history. Despite keeping their same, slightly more “expensive” plan with a base premium of $100,000 as they had the previous year, their net premium plummeted to $82,000 ($100,000 X .82), due to their excellent loss history.

In Summary:

After 2 years, Warehouse A, who spent hours upon hours searching for the best rate in town failed to take safety seriously and ended up with an annual Workers’ Compensation premium of $115,000. Warehouse B, who took the time and a little money to invest in safety programs, garnered a premium of only $82,000, a whopping one year savings of $33,000 less than their friend!

Now I ask you, are  you still wondering if investing in safety pays??

Creating A Safety Plan

If you are ready to invest in a safety plan, let us know. Our Safety Team has years of experience and can get you up and running in a matter of days. Learn more about our Risk Management and Human Resource Consulting services.