More than 130 years after workers’ compensation was introduced, it remains a significant business expense for employers worldwide. This type of insurance covers work-related injuries that employees may suffer on the job.
Workers’ comp is an especially crucial concern for businesses. The effective management of employee compensation plans could play a significant role in mitigating business risk and preserving company assets.
One of the most important factors affecting workers’ comp premiums is “X-Mod” or “experience modification rate.” Your X-Mod could significantly affect the insurance premiums that companies pay depending on how they manage workers’ compensation claims.
Here are some of the things you should know about X-Mod:
X-Mod rates indicate the overall performance of a business regarding workers’ compensation claims. They are similar to credit scores, but they measure a business’s compensation performance instead of credit standing.
Credit scores typically determine the type of loan you have access to and the interest rates you must pay. On the other hand, X-Mod ratings determine the insurance premiums you will have to pay for a specific policy period.
How is X-Mod calculated?
The X-Mod rating of a company is calculated by the Workers’ Compensation Insurance Rating Bureau (WCIRB) in that particular state. Ratings are determined by comparing a company’s business injury claims to the average claims made by similar businesses in the same industry.
The formula for determining X-Mod rating involves a three-year data aggregate of the claims made against different companies locally. To figure out the X-Mod of a particular company, the WCIRB will compare its expected losses against the total business losses.
How does X-Mod affect the premiums for workers’ comp insurance?
X-Mod provides insurance firms with information regarding the potential financial risks of offering workers’ comp coverage to particular businesses. Companies with 100% X-Mod ratings may have their premiums adjusted in their favor.
Businesses with a 125% X-Mod rating will generally get a 25% increase in premium. For example, companies that previously had a premium of $5,000 will have to pay $6250 after adjustment.
On the other hand, businesses with 80% workers’ compensation premiums will pay $4,250 after adjustment.
The actual amount of adjustment may vary depending on other factors. It is advisable to check the WCIRB page for more information regarding the amount that you will have to pay for workers’ comp.
Will a higher X-Mod rating entail a Cal/OSHA inspection?
Companies that experience a serious employee injury have a good chance of being subjected to a Cal/OSHA inspection. This is also the case with businesses that have an X-Mod rating of 125% or higher.
How can businesses reduce their X-Mod rating?
As a business owner, there are specific measures you could take to improve your X-Mod rating. The key is to understand how to manage workers’ comp issues effectively. Here are some of the steps that you could implement:
- Provide more details on employee screening
- Provide training on OSHA safety guidelines
- Implement a compulsory safety program
- Compensate employee for exemplary safety practices
It is also advisable for businesses to review their current claims management policies. Many companies benefit from active participation in the processing of employee claims. You may also consider implementing a system for reducing claim lengths and total costs.
Monitoring your X-Mod ratings
As a business owner, it is essential to keep track of your X-Mod rating to ensure its correctness. An inaccurate or erroneous rating could increase your business insurance premiums and could affect your finances for many years to come.
Consider getting help with managing your LA workers comp insurance concerns. Having an insurance firm handle your X-Mod auditing will help you eliminate factors that cause your premium rates to increase. A company experienced in workers’ comp issues could also help you avoid payroll errors and wrongful claims and make it easier for you to manage claim status changes.
Getting a handle on your X-Mod rating
It’s no secret that workers’ comp premiums have increased steadily over the years. Thorough knowledge of X-Mod and how it affects insurance premiums could help companies manage workers’ comp performance more effectively.
As an employer, it would be beneficial for you to get a handle on your X-Mod rating. A high X-Mod score can have many lasting adverse effects on your business, including limiting your ability to secure projects, bid for government contracts, and even stay in business.
All businesses deal with workers’ compensation issues at some point. The key is to manage such concerns effectively so you could reduce the adverse effects they have on your finances.
About Arroyo Insurance Services
Arroyo Insurance Services was officially established in 1986, but we have roots dating back to before 1950. One of California’s leading client-oriented and independently owned agencies, we have over 140 employees with a combined experience of over 450 years, spread across 11 locations. We are committed to providing the best insurance and risk management services at the most competitive premiums, and backing it with hands-on service tailored to our customers’ needs. For more information on how we can mitigate your risks, contact us today at (877) 220-4769.