Understanding the Effect of Experience Modifiers
By Mike Drew, The Reschini Group
Lots of people like tattoos. Some commemorate a key life event, others a sentimental symbol. It doesn’t matter what a tattoo looks like, how big or small it may be, or even where it has been inked onto a person. One thing remains true, however – that tattoo is never coming off.
How fortunate, then, that other types of “marks” – seemingly there forever, when first applied – can indeed be removed over time?
Take Experience Modifiers for example. These are numbers assigned by rating bureaus (in Pennsylvania, it’s the PA Compensation Rating Bureau) to companies based on illnesses or safety-related incidents that cause an employee to lose time on the job. Experience Modifier scores also affect the cost of insurance – more so when it comes to indemnity claims than medical claims.
Let’s say XYZ Company has not experienced one of these events for three years. At that point, the state would assign XYZ Company an initial Experience Modifier based on that record. But severe cases of safety-related lost-time that may occur in subsequent years could cause the Experience Modifier number to increase by a maximum of 0.25, meaning that XYZ Company’s premiums could increase by 25 percent to merely maintain the prior level of coverage. Once a large claim begins to affect your Experience Modifier, it will do so for three years until it is removed from the calculation.
It’s important to note, however, that Experience Modifier can also go down as annual performance remains free of safety-related incidents, helping to minimize or recover from years where events resulted in higher premiums.
Another key factor in helping to deflect the negative impact of an increased Experience Modifier score – especially related to indemnity claims from safety-related lost work time – comes in the form of having a solidly defined, easily implemented Return-to-Work Program in place. A Return-to-Work Program identifies ways and means of helping employees who have been hurt to come back in either a temporary role, or to their regular job, but with modifications as appropriate.
A Return-to-Work Program, along with an established safety program, helps to limit not only the accidents from happening in the first place, but the associated costs that they can generate. They represent good-faith efforts to protect employees and keep them actively engaged, even after experiencing a safety-related incident. They can help to limit negative changes to a company’s Experience Modifier score, and the impact on insurance premiums that can result.
Let the team at The Reschini Group help guide you regarding these matters. After all, not every tattoo is permanent.
Copyright 2016 The Reschini Group
The Reschini Group provides these updates for information only. To make decisions regarding insurance matters, please consult directly with a licensed insurance professional or firm.