Business owners are always trying to contain costs for their business. They do the right thing and provide Workers Compensation insurance for their employees because accidents happen. And what does the insurance company do when the business uses the insurance that they pay for? They increase the premiums of the business owner at renewal. This is one of the most frustrating things about insurance. This leaves many owners asking “What are my premiums paying for if, when I use it, they charge me more?”
Many owners will shop their insurance, but what if they are a roofing company and with no other options for worker compensation in Colorado but Pinnacol? There are some options within Pinnacol that can help lower premiums and improve ‘Experience Modification’.
I thought an EMOD was something my kids listened to ...
Experience Modification, or EMOD, is the insurance industry’s method of keeping track of the amount and severity of claims that a business experiences. The more claims a business has, the higher the business’s Experience Modification is and the higher the premium at renewal. A good way to keep your EMOD down is to have a deductible on your policy. This works well for businesses that have a lot of little claims. If the claim is under what the deductible is, the insurance company treats the claim as if it never happened and doesn’t increase the EMOD. This will save premium dollars in the long run.
An EMOD compares companies with the same exposures against each other. Let’s say that the average number of claims for a roofing company is 5 per year. Roofing Company A has a rough year and has 7 claims; they are above the average and will likely experience a higher EMOD. Suppose Roofing Company B has a good year and only one person had to file a Workers Comp claim. They will have a lower EMOD and could even experience a decrease in the premiums they pay. Roofing Company C decided to get a deductible plan. They had 6 claims last year, but 5 of the claims were small incidents that didn’t meet the deductible. Roofing Company C’s EMOD will reflect that they only had one claim and they could pay less in premium next year, because they chose a deductible option.
An ounce of prevention is worth a pound of cure ...
Cost containment is another way to reduce a business insurance premium. This is comprehensive safety program designed to help a company prevent work place accidents in the first place. It is a 6-step program that Pinnacol uses for cost-containment certification:
- A formal declaration of a company-wide safety policy
- A formal designation of a safety coordinator or safety committee
- Clearly defined safety rules and enforcement policy
- Documented new-hire and ongoing safety training
- Written designation of medical providers
- Written policies and procedures for claims management
Cost containment programs are tailored for each specific industry. Once your company becomes certified, you automatically get a 5% discount on your premiums. Not the biggest savings, but the program is designed to prevent accidents from occurring. The real savings begin when your company improves their EMOD through having fewer claims than other businesses in the same industry. Not only will a business benefit financially through reduced premiums, but the cost savings for not having to train another person to take over for an injured worker is difficult to put a dollar amount on.
A business is always looking to save money and keep workers on the job. Deductibles and the cost- containment program are great ways of doing both.