What Is Your E-Mod Costing You?

January 18, 2024 • Previsor

No matter what type of business you run, keeping a keen eye on your bottom line is crucial to success. From operational expenses to employee management, every aspect demands careful attention. However, in pursuing profitability, some elements often lurk in the shadows. They silently impact the business over time. One factor that demands a closer look is your experience modification factor (e-mod).  

Understanding the basics of e-mod

Your e-mod is a crucial metric that insurers use to determine the cost of your premium. They assess your company’s past workers’ compensation claims and the related costs.  

In simpler terms, it’s a yardstick that measures your company’s safety performance and risk compared to other businesses in your industry. A higher e-mod signifies greater risk, potentially leading to increased premiums, whereas a lower e-mod can translate into significant cost savings. 

The hidden costs of a high e-mod

While the numerical value of your e-mod may seem harmless, it can have far-reaching implications for your business. A high e-mod could be quietly draining your profits without you even realizing it: 

  • Higher insurance premiums. Elevated e-mod ratings can lead to higher insurance premiums. This directly impacts your operational costs, reducing your bottom line and affecting your ability to invest in growth and development initiatives. 
  • Reduced competitiveness. A high e-mod can make it difficult to secure contracts or partnerships. Potential partners and clients are increasingly prioritizing risk management. Businesses with lower e-mods are often considered safer and more reliable options, making them more appealing to discerning stakeholders. 
  • Higher turnover. A workplace with frequent accidents and injury claims can lower employee morale and productivity. This leads to increased turnover rates, reduced efficiency, and additional recruitment and training costs. 

Strategies for e-mod improvement

While it is important to understand the hidden costs, it’s also essential to understand how you can proactively improve your e-mod.  Here are four measures that can help mitigate costs and foster a safer and more efficient work environment: 

  1. Prioritize safety training: Implement comprehensive safety training programs to educate employees about potential risks and best practices. This helps foster a culture of safety and responsibility within your organization.
  2. Enhance risk management protocols: Develop robust risk management protocols tailored to your industry’s specific hazards. Ensure proactive measures are in place to prevent accidents and minimize the likelihood of workplace incidents.
  3. Foster a culture of accountability: Encourage open communication and transparency regarding safety concerns. Empowering employees to report potential hazards without fear of retribution. Cultivating a culture of accountability can significantly reduce the occurrence of workplace accidents.
  4. Regular evaluation and improvement: Continuously evaluate your safety measures and identify areas for improvement. Regular assessments and adjustments can help maintain a safe work environment and contribute to a sustained reduction in your e-mod.

Long-term process

It’s important to remember that your e-mod is based on three years of loss history, not counting the current or prior policy year. This means that impacting your e-mod is a long-term process rather than something that can be solved overnight. Contact our Safety and Risk Services team to see how we can help you plan for the future. 

January 18, 2024
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