Workers’ compensation insurance is required of almost all employers. Several factors, such s the industry you operate in, can lead to premiums that add a substantial sum to your annual expenses. One of those factors is your claim history. Understanding how it impacts your worker’s comp premium is impacted by previous claims can help you keep costs under control.
Each employer will be given an experience modification that rates their risk to an insurer. Both the number of claims and the severity of injuries are used to determine the extent of workers comp claims impact on premium costs.
Frequency of Claims
While it may seem logical that major claims would have a bigger impact, the number of individual claims that are filed actually affects insurance premiums much more. An employer’s E-mod score is negatively affected by the first $18,000 of each claim filed, regardless of the total size. This is why safety programs that reduce the number of accidents can have a favorable impact on insurance premiums.
Severity of Injuries
Large claims that involve serious — and expensive — injuries affect your E-mod score at a disproportionate level. Once the initial $18,000 threshold is crossed, each $1,000 claim cost has only a minor impact on the overall score.
You have some control over your E-mod rating. Safety training and accident prevention programs can drastically improve claim rates, leading to lower premiums in the future.