Two Strategies to Help Lower Workers’ Compensation Costs

APRIL 1, 2025

Claims are the single biggest driver of a workers’ compensation program’s overall cost. Insurance companies often set claim reserves too high, or leave claims open longer than necessary. This can result in a higher experience modification factor (e-mod) — which will drive up premium.

Unfortunately, this makes your risk profile less desirable to insurers. For many businesses, especially in the construction and industrial sectors, a higher-than-average e-mod could disqualify them from bidding on or securing contracts.

Fortunately, reviewing claims for proper reserving and timely closure, prior to the e-mod being developed, can have a positive impact on your premium.

Insurance companies are responsible for submitting updated claims data to the rating bureau, typically six months prior to the policy expiration date. This data is used to develop the insured’s e-mod.  However, many insurance brokers conduct claim reviews as part of the renewal cycle, only 30 to 60 days before renewal, which is too late to impact the e-mod calculation.

To ensure reserves are set according to the most probable outcomes rather than worse-case scenarios, USI Insurance Services proactively approaches our clients approximately eight months before their renewal date to review their claims and discuss updates with the insurance company.

We emphasize the review and updating of claims data prior to the bureau’s filing deadline to maximize cost-savings opportunities. As a result, our clients’ premiums are frequently reduced by 10% to 30%.

Case Studies

Claims Closure: A manufacturer and distributor of pump equipment, spending $60,000 per year on workers’ comp coverage, wanted to gain more control over costs. USI reviewed open claims and identified one that could have already been closed, since the employee had returned to work five months earlier. After we discussed this with the insurance company’s claims adjuster, they agreed to close out that claim. This prevented an increase in our client’s e-mod from .94 to 1.03, which reduced their renewal premium by $5,400.

Reserve Reduction: An excavation contractor facing large workers’ comp claims was concerned about its increasing cost of coverage over the past few years. USI conducted an in-depth review of the contractor’s open claims, and identified some with very high reserves. After we shared these findings with the contractor, they selected USI as their broker. We then worked closely with the underwriter to reduce reserves on a few notable claims. This resulted in a total reserve reduction of $42,000, and lowered the contractor's renewal premium by $6,800.

Ensure your premiums are based on fair and accurate claims data in time to positively affect your upcoming renewal. To learn more about the risk management services available through USI, email select.business@usi.com.