Protecting The Experience Mod

For states under NCCI’s rating system for Experience Modification Factors, many employers have been on the receiving end of a high mod due to claim activity causing a surcharge to the manual premium of their Work Comp policy. This can often lead to upset employers trying to mitigate further increases by taking matters into their own hands, which usually does not generate desired results. And often, these internal decisions create a larger exposure of liability for the employer than the extra dollars paid by the high mod.

A common thought by employers is no claims paid, no mod increase, which is a true equation as long as no claims paid really means no claims at all. But claims do happen and that is what the insurance is for. So how does a claim have the least amount of impact on the Experience Mod? How do you keep an injury code as a 6, as opposed to a 5 or 9? Do you as an agent know the difference between injury codes 5,6,9? Is there a light-duty option? Does the employer have access to an “occupational” medical provider that understands the importance of Return to Work for the benefit of the injured employee? Are claims closed out before the data reporting to NCCI? Depending on how these questions are answered can be an indicator of how successful an employer will or won’t be in protecting their Experience Mod.

The questions above are a few items during the claim process that should be addressed to minimize a mod increase, but another more important question is on the front end… What is the hiring process?

A few years back, an insured whose dominant class code is sheet metal installation, experienced a claim that severely impacted their Experience Mod because their Return to Work/Light Duty program was not very buttoned up. This was realized not because the injured employee wanted to come back as soon as possible, rather the employee wanted to receive Indemnity benefits from the comfort of their couch for as long as possible. So how could this have been prevented? The injury was legit so the policy responded, but after an internal accident investigation, it was determined the employee was doing more than they were physically capable of. Due to project completion goals, more work was being put on the staff. The staff was happy because this meant overtime, but this exposed employee limitations. 99% of the staff had no problem performing except one, and this one created a 23% surcharge to the manual premium for 36 months.

The scenario above made the employer look closely at their hiring process, and how can they be better. At the time (and still) unemployment numbers were very low, and it was difficult to staff enough to meet the demand for product to be installed. So when there was an applicant that passed the “eyeball test”, they were hired. They worked alongside senior employees for a time until they could be trusted to perform unsupervised. But there was a breaking point because of increased work (by a willing employee to put in the overtime hours). How would the employer have known of the employee’s weak(er) knee that gave out causing injury? Frustrated, the employer told me “We never asked. You’d think a grown man applies for a position, he should know whether he can or can’t pull his weight”. This attitude is extremely common for artisan contractors and tradesmen.

Experiencing this claim’s impact, and what can be done to prevent it happening again, the following was added to their existing process:

Applicant fills out application and comes in for an interview
1. On the application, it asks of any previous injuries
If an employer wants to hire, there is a conditional offer made
1. Conditional offer is contingent to pre-hire physical exam
2. Applicant brings in current MVR
3. Applicant reads and signs in agreement to the nature of the job applying for including the physical and mental strain potential of the position
4. All employees are subject to random and or post-accident drug tests

It is important to note this is a conditional offer. Too many times these items are addressed after the applicant is hired, making termination because of not meeting a requirement tricky.

There are raised eyebrows now to how truly injured the employee was in relation to the length of time off, but it was too late at the time to change the course the claim was already on. The waiting period to get the employee seen and approved for light-duty expired defaulting to indemnity benefits. The communication from the medical provider to the carrier was very inconsistent, in the process of recovery the employee obtained a lawyer seeking a partial disability settlement. And as the carrier has the right to do, they acted in their own best interest agreeing to a settlement amount to close the claim. All of this was now carried by the employer’s Experience Mod driving premiums up.

The details listed of the changes to the employer’s hiring process are paraphrased to give a general understanding of the new processes. These details should always be reviewed by legal counsel to align with the current employment laws as they are ever-changing and vary state by state.

The key in all this is identifying on the front end during the hiring process who may be a liability to the company in a variety of ways. This focuses on the potential impact on the cost of Work Comp premium as this is often overlooked and not factored into standard hiring processes.

About Brian Carr

Before getting into insurance in 2013, I spent 18 years in the marble and granite industry. In 11 of those years I ran my own company, so I have been on the other side of the table when speaking to insureds. Understanding first-hand how Workers Compensation can seem so confusing to business owners, I have made it my focus to advise companies on recapturing unnecessary premiums to invest back into their company.