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Workplace injuries are costing your business money in a many ways; increased insurance premiums, cost of hiring and replacement, lost efficiency, additional training, increased paperwork and administrative costs, and more.
When I speak with business owners and CFO’s they often tell me, “the rates are what they are so there is nothing you can do to change what I pay for work comp.” While the state and the NCCI (National Council on Compensation Insurance) do set the class code rates in Florida, the employer has much more control over their premiums than they initially think.
What Employers CANNOT Control:
The state sets the rate. Standard rates for Workers’ Compensation policies in the state of Florida are set by the NCCI. That means, whatever “class code” the job description of your employees fall into, is the rate you pay. Rate x Payroll = Standard Premium. But did you know, there is another factor that affects the rates you pay? And you have control over it!
Here’s What You CAN Control:
The Experience Modification Factor (The MOD). Every business that is subject to Workers’ Compensation develops their own MOD over time. The MOD is essentially a multiplier of your rates. It can (sometimes drastically) cause your Work Comp premium to increase or decrease based on how your most recent 3-year loss history compares with your competitors. The equation NCCI uses to calculate your MOD is complicated, but to simplify, if you have more Work Comp claims than your competitors and the claims dollars are higher, you are going to have a higher multiplier (MOD) than they will.
How You Can Control The MOD:
If your company has average claims frequency and costs, you’ll have a MOD of 1.00. If your claims frequency and costs are higher than your competitors, you’ll have a MOD greater than 1.00. If they are lower than your competitors, you’ll have a MOD less than 1.00.
Here is an example:
- Company A and B both have a base Work Comp premium of $50,000. Company A has lots of claims and a MOD of 1.35. Company B has very few claims and a MOD of 0.65.
- A’s Premium Calculation: $50,000 X 1.35 = $67,500 (That’s 35% more than their average competitor.)
- B’s Premium Calculation: $50,000 X 0.65 = $32,500 (That’s 35% less than their average competitor and less than half of A’s premium!)
Depending on the size and scope of your business, it may be unrealistic to eliminate all workplace injuries. However, the handling process is extremely important to reducing the dollar value of the claim. At Gulfshore Insurance, we work with you and provide materials, training, and awareness for your employees. We also have in-house Claims Specialists who are licensed adjusters, navigating each claim on your behalf.
Jeffrey Sanders, TRIP is Client Advisor at Gulfshore Insurance. Jeff works with a wide range of business clients to deliver strategic risk analysis, guidance, and insurance. Comments and questions are welcome at firstname.lastname@example.org
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