By the very nature of the insurance business, agents are busy folks. So, it’s easy to understand how some “details” can be missed, like the importance of keeping a trained eye on an employer’s workers’ compensation experience modification (mod) factor. What may be an unintentional oversight often translates into doing a disservice to a client — a disservice that can cost an employer potentially thousands of dollars in increased workers’ comp costs.

At the same time, experience suggests that many agents are not fully aware of the enormous influence the mod plays and, more importantly, how to help a client manage it to the lowest permissible point. Here’s a checklist that can help agents better serve their employer clients:

1. Agents need to know each client’s minimum experience mod.

Each employer experience mod has a minimum mod; in other words, where it would be had the employer not encountered any employee injuries during the period covered by the experience mod.

If you don’t know what the minimum mod is, you can’t tell an employer how much of their costs they control. Ignoring this makes it difficult for an employer to understand why they should make efforts to reduce employee injuries.

2. Agents need to be more alert to the importance of getting injured employees back to work quickly.

In many states, employers get a 70 percent discount for the injury on their experience mod if they return employees to work before lost-wage payments begin.

Even ignoring that benefit, employees who return to work — even if their job is modified — save the employer from unnecessary lost-wage payments that increase the mod, as well as the “soft costs” that accrue when employees are out of work.

Additionally, the longer employees are off the job, the less likely they are to ever return to work. While getting the injured employee back to work as soon as possible reduces workers’ comp costs, it also aids the employee’s recovery. Studies show that recovery at work is quicker than staying home.

3. Agents need to keep track of injured employees.

See this as an extension of rule two. It’s important to have a process in place so employers report injuries to the insurance agent as soon as they occur. This allows an agent to manage the process to make sure the process flows smoothly.

The insurance companies deal with thousands of clients and adjusters may have well over 100 open files that they are tasked with managing. So it is up to the agent to take the reins and be the link between the employer and the insurance company when an employee enters the workers’ compensation system.

This needs to be done in a timely fashion. If the agent isn’t made aware of an injury until 30-45 days after Joe Worker slips and falls on an oil spot on a factory floor, then it’s too late to intervene effectively. By then, it’s like trying to put toothpaste back in the tube.

4. Agents need to correct job misclassifications.

At its core, the experience mod is the difference between what the insurance company expects to pay and what they actually pay for an injury. High-risk work causes the insurance company to expect to spend more. If an employer has employees who are classified incorrectly (and that’s a whole other article), their experience mod will be incorrect.

The rating bureau in your state publishes a full list of classifications. It’s imperative to review the classifications for your employers. Excluding Pennsylvania and Delaware, which have far fewer, there are more than 600 possible classifications, and changes do happen. Take the time to look at class codes that the bureau says are similar but not the same, to see if you can find out if some are a better fit than others.

5. Agents need to deal with open claims.

Don’t ignore the unit start date. This is when the insurance company takes a snapshot of an employer’s business over the past three years (not including the last year) to determine what has been spent by the insurance company and what it expects to pay on claims. So make it a priority to look for open claims before the snapshot is taken. Anything that is open deserves scrutiny. Talk to the adjusters to ensure the reserves are adjusted properly. Employers rely on the agent to make sure that the check they write is correct. If you are ignoring the valuation date, it’s almost certain the check will be wrong — and higher than it needs to be.

6. Agents need to know not to cancel/rewrite a policy without examining the impact to the employer.

A cancel/rewrite of the workers’ compensation policy will change how many months of experience will be considered on the experience mod. A cancel/rewrite done at the wrong time can cause policies to stay on the experience mod longer than they would have otherwise, and in turn drives the experience mod up dramatically.

The employer will carry this increase for up to nine months (depending on when the cancel/rewrite was done). No agent should be doing a cancel/rewrite without analyzing what the potential impact might be on the mod. By failing to do so, agents leave their employers vulnerable to being overcharged and, in turn, the agent vulnerable to losing that client when someone points out their inattention.

By making this checklist an important part of how they work with their clients, agents will realize that not only are they saving their clients money, but also are building up an impenetrable stonewall of trust that will keep their clients with them for a long time to come.

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Six Ways to Keep a Client&rsquo;s Experience Mod Under Control

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