An experience modification factor is a term used in workers’ compensation insurance.

Experience modification factor is a number used by insurance companies to gauge both past cost of injuries and future chances of risk of employee claims for a particular business.

The insurer compares an employer or business’s workers’ compensation history against other companies or businesses with comparable operations and payroll classifications to calculate this number..

Every single business or employer which carries workers’ compensation coverage is assigned an experience modification factor to gauge both past cost of injuries and future chances of risk.

10-50% of experience modification factors calculated by insurers are simply incorrect

More than 80% of experience modification factors are mismanaged. This can be due to the following:

• The rating bureau may use incorrect payroll classifications for a business’s employees
• Credits are not applied properly
• Incorrect data entry
• Duplicate entries for costs related to employee injuries
• Money recovered where a third party was actually at fault for the injury is erroneously included by the insurer in the calculation of an employer’s experience modification factor
• Insurers never report to the workers’ compensation ratemaking authorities when a third party is ultimately determined to be at fault for a claimed work-related injury to remove them from your business’s workers’ compensation insurance records
• Insurer expenses that have no business being charged against your business’s record

Keeping your experience modification factor as low as possible is the single easiest way for your business to lower its workers’ compensation costs.

Prevent employee injuries in the first place by operating as safe a workplace as possible. More claimed workplace injuries result from the plethora of attorney ads about unsafe workplaces rather than from actual injuries or unsafe workplaces

Create alternative duties for injured workers to urge them to return to work immediately so the insurance company does not have to pay out any claims for lost wages

• It costs your business up to $3 in future workers’ compensation insurance premiums for each $1 the insurance company pays out for claims

Injured workers should only be off for more than 3 days if they are hospitalized, on bed rest, on medication preventing them from working, or if they are contagious.

Communicate frequently with injured workers when they are not working to prevent them from hiring an attorney and pursuing a workers’ compensation claim, costing your business dearly