I have posted very often about how your company’s E-Mod/X-Mod can make or break your Workers Compensation insurance budget. One of the most popular questions we receive is “Our E-Mod is low and we have had no accidents. How can our premium have increased so much in such a short amount of time?”
One of the shortcomings of the present Experience Modification system is that in a bad year for your company’s overall industry, even a good safe employer can suffer greatly. If companies that share your Classification Codes had a bad year with Workers Compensation claims, then your company will share in their loss as the Class Codes your company possesses will become more expensive even if your company has had a good year with Workers Comp incidents.
For instance, if your company is a trucking company that has instituted many safety measures and lowered your E-Mod this does not mean a decrease in premiums. The Class Code for Long Haul Trucking is 7228. If most of the long haul trucking companies in a certain state had many accidents, the NCCI or State Rating Bureau will increase the 7228 loss cost or advisory code. If the increase in 7228 was very sharp, then you may see a large increase in your company’s premiums even though your E-Mod is reasonable.
E-Mods can individualize you company’s safety efforts, but only to a certain point. The E-Mod/X-Mod system is a good system, but it does have its faults. Many employers are looking to PEO’s, Self-Insurance, and Captives as alternatives to regular Workers Comp insurance policies. One of the main reasons is that the cost of your Workers Comp insurance program is not affected by outside influences as much with some of the alternative programs.
Captives are becoming very popular as they are the best way to have the premiums that employers pay being only based on the specific employer, not a group of similar employers. In other words, your safety efforts are rewarded more than some of the other programs.
Article provided by James J Moore, AIC, MBA, ChFC, ARM. All articles are original content. Check out the full website at www.cutcompcosts.com.