Reduce Workers’ Compensation Costs With E-Mod Review and Analysis

DECEMBER 3, 2024

Risk management and insurance experts agree that the most effective way to reduce insurance costs is to target the root cause. A great starting point is your experience modification rate (e-mod), a key component of workers’ compensation pricing models used by insurance companies that directly impacts premium.

For example, USI recently helped a mid-sized manufacturing company in the Midwest achieve significant cost savings by improving the accuracy of its e-mod. By conducting a thorough review and analysis, USI identified and corrected errors that had inflated the company’s workers' compensation premiums. This proactive approach led to a 15% reduction in annual workers' compensation costs, resulting in over $100,000 in savings.

Recent statistics also highlight the importance of such measures. The National Safety Council reports that workplace injuries cost U.S. employers $171 billion annually, including $44.8 billion in workers’ compensation costs.

Understanding the Impact of Your E-Mod on Workers' Comp Costs

The e-mod is a crucial factor in determining workers' compensation premiums, as well as statutory surcharges and assessments. It reflects an organization's historical loss experience compared to the industry average. A higher e-mod indicates a greater risk of workplace injuries, leading to increased premiums. Conversely, a lower e-mod suggests better-than-average safety performance, resulting in lower premiums.

Understanding and managing your e-mod can significantly impact your workers' compensation costs, especially guaranteed-cost premiums. For some industries, such as construction, an e-mod over 1.0 can disqualify an insured from bidding on or winning a contract.

Ensuring E-Mod Accuracy and Correcting Errors in Premium

To ensure the accuracy of your e-mod and correct any errors in your premium, it’s important to follow these steps:

1. Obtain your e-mod worksheet — Request a copy of your e-mod worksheet from your insurance carrier or rating bureau.
2. Review claims data — Examine the claims data used to calculate your e-mod. Look for any discrepancies or errors in the reported claims.
3. Verify payroll and class code information — Ensure that the payroll data is accurate and up to date, and that the insured’s classification codes by state are consistent with the historical policies.
4. Ownership changes and combination of entities — Another factor that may affect the e-mod is a change in the ownership of an individual employer. When ownership changes, the employer must notify the insurance provider in writing within 90 days of the change.
5. Identify and correct errors — If you find any errors or discrepancies, work with your insurance carrier to correct them. This may involve providing additional documentation or evidence to support your corrections.
6. Monitor and maintain — Regularly review your e-mod and claims data to ensure ongoing accuracy, and address any issues promptly.

Generating Future Premium Savings

Following a review and confirmation of your e-mod’s accuracy, a comprehensive analysis shifts from a retrospective review to a prospective analysis of your controllable e-mod, which is the difference between the current mod and minimum mod.

This prospective analysis quantifies the potential for future mod improvement and premium savings by:

• Identifying trends — Analyzing historical claims data can reveal trends and patterns that contribute to higher e-mods. Addressing these trends can help reduce future claims and lower your e-mod.
• Implementing safety programs — Based on the analysis, implement targeted safety programs to address specific risks and reduce the frequency and severity of workplace injuries.