Philip was driving to pick up a tool rental for a construction job his company was working on when another driver rear ended his car causing Philip to sustain serious back injuries. Ultimately the workers compensation insurance policy purchased by the construction company Philip was working for paid the hospital bills and lost wages. Since the bill was north of $100,000 the effect on the construction company’s workers compensation experience modification factor was significant. It doubled both their direct and indirect workers compensation costs which impaired their future bids. Further it drove their mod well past 1.2 precluding them from bidding Federal & State work which carries a requirement that all bidders achieve an experience modification factor of 1.2 or lower.
Not only is this not fair, but it’s also quite common. The problem is 4 fold:
- In motor vehicle accidents like above workers compensation may be primary when an employee is injured in the course of employment.
- If a third party is clearly negligent, even a little bit, you (and/or) your workers’ compensation insurance carrier can subrogate to recover the funds.
- Few clients, and even fewer insurance brokers, track the progress of subrogation and make sure that the carrier or plaintiff does not compromise the client’s workers compensation policy.
- When the carrier does receive subrogation funds reimbursing them for the client’s claims costs no one notifies the state workers’ compensation board to make sure the experience modification factor gets re-calculated in the client’s favor. In situations like these, we may have the ability to go back 5 years contingent on the date of claim and state. What’s a potential 10% credit on your workers’ compensation premium each year for 5 years’ worth?
The net result is the business owner or client ends up with an artificially high experience modification factor which not only significantly impacts their unit cost structure, but it may also impact their ability to bid new work as the artificially high workers compensation experience modification factor will knock them out of contention.
It’s no secret keeping your experience modification factor low is a solid strategy to better position your firm to compete harder in a challenging business environment. Owners know that when folks are reviewing RFP’s they are looking at this critical business statistic. Your experience modification factor not only distinguishes you from your competition it also is a major cost driver.
We suggest the client looks for a Risk Advisor or broker that employs a claims advocate that works on behalf of the client who will track all workers’ compensation claims until they are closed. By simply following up every few months and asking the right questions you can have a material and substantive impact on lowering claims and ultimately your costs. This is especially true when there are other negligent third parties involved that could contribute to or for the claim in it’s entirety.
A wise friend once told me sunshine is the best antiseptic, with respect to workers compensation claims clearly this is wise advice and protocol.
