Managing costs and reducing expenses is one of the main priorities of many business owners. Given the high costs of insurance premiums, it makes sense to focus some effort on managing XMOD rates.
Effective XMOD rate management essentially involves ensuring the veracity of data related to workers compensation claims. It would also help to know your company’s ideal rating, which isn’t the same for all firms.
That’s the short answer to the question of how to manage XMOD rates effectively. But doing so requires knowledge of many other factors.
What is the XMOD rate?
Before we go any further, it might be helpful to define what XMOD is and how it affects your company.
XMOD goes by many names, including EMOD, EMR or EMR rating. By whatever name, it stands for “Experience Modification Rate”, which is a rating system for workers compensation programs implemented by companies. Specifically, it determines how companies compare to similar firms in terms of payroll information and historical claims.
The XMOD rate is used to adjust the premiums that companies pay for workers compensation. Among other factors, it takes into consideration the firm’s expected losses compared to the incurred losses during a specific period.
The XMOD rating has a significant effect on the premiums a company will have to pay for employee comp. The effective management of workers compensation claims will generally result in lower premiums. Conversely, companies that are less effective at claims management will have to pay higher premiums.
An unfavorable XMOD rate can have a significantly negative impact on a company’s finances. In more extreme cases, it could even cause a company to go bankrupt, it is therefore vital to learn as much as you can about XMOD so you can implement measures to manage your rating more effectively.
How do you determine your XMOD rating?
Knowing your XMOD rating is essential for taking the proper measures to fix it. You can determine the accuracy of your policy’s rate by undergoing an Experience Modification Rate Review. The review involves a comparison of data from the experience period against the experience rating formula. The data used is derived from each year that you qualify for rating.
Tips for improving your XMOD rate
There is no way a business can guarantee that it won’t have any compensation claims during a particular experience period. Therefore, the key to improving your XMOD rating is to manage your workers compensation program effectively. Here are some suggestions on how to do that:
Know your ideal Experience Modification Rate (EMR). Find out your optimal EMR. This signifies your rating during an experience period wherein no claims were filed. Knowing this information will help you determine the ideal rating to strive for.
Ensure the accuracy of your rating factors. All rating factors should be verified as accurate. This includes expected loss rates, codes, discount rates, split points, and credibility factors. Don’t neglect seemingly inconsequential factors such as weighting and ballast. All of these will affect your rating.
Check the accuracy of the experience period. You will need to make sure that the experience period is accurate as well. It is especially important to ensure that all claims, codes, payroll information, and other data used in the rating are within the prescribed experience period.
Keep track of claims and losses. Careful monitoring of claims and losses is essential for a favorable XMOD rating. Among the most important things to consider are closed and settled claims, as well as open claims that are still active. Be on guard against non-compensable claims and improper claims, as these could affect your XMOD negatively.
Be proactive about workers compensation claims. The most successful employers are those that actively participate in the claims process. Some of the steps you could take are establishing return-to-work programs and consulting with the claim adjusters of your insurance firm. These measures could help you reduce payments, which in turn will improve your XMOD rating.
Consult with a workers compensation specialist. If you encounter any problems with your XMOD rate, consult with an independent workers compensation specialist at the soonest possible time. These professionals have the knowledge and experience to help you improve your rating so that you can minimize the costs of insurance.
In closing
As a business owner, you’re probably always looking for ways to cut costs. Managing insurance-related expenses is an important step, but it isn’t always easy or practical.
Improving your XMOD rating can have a significant effect on reducing your insurance premiums. If you want to reduce costs and improve your bottom-line, managing your XMOD is one of the most effective strategies you could implement.
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.