Saving on Workers’ Comp Premiums: The Long View Wins the Game

Quick quiz: What’s the best method to shave costs related to workers’ compensation? Hop to a new carrier? Or, digging in to a comprehensive loss control program?

For some, the end of the year brings an array of low-premium workers compensation offers that promise big up-front savings. But here’s what they’re not telling you: Real savings with workers compensation comes from minimizing risk and preventing claims. 

That’s because the main driver of your workers’ compensation premium isn’t a short-term discount, but the dollar amount and frequency or number of your workers compensation claims. A lower up front premium doesn’t resolve potential safety hazards or compliance issues, and that’s where the real impact to your bottom line resides.

Allow us to explain:  Just as auto insurance providers factor in the number of accidents and tickets as predictors of future losses, and subsequently, your premium; workers’ compensation premiums are primarily determined by a formula that considers the frequency and severity of your claims to come up with your “MOD” factor. 

The more claims you have, the higher your MOD factor. Higher MOD factors increase your premium; lower ones reduce it. Through the application of the MOD factor, in almost all cases, it is the employer who ultimately pays for their employee’s injuries, not the insurance company. 

If you continue to incur losses it doesn’t matter how many different carriers you quote with your premium will eventually increase to pay back the insurance company for those claims.

To truly reduce costs employers must move beyond the bidding process and implement a loss control program designed to reduce hazardous conditions which will reduce claims which will reduce your MOD factor which ultimately will reduce your premium costs.

That’s why at MADSIF, we focus on controlling the costs of insurance over the long-term, providing members with a robust suite of customized services to support our own, including MIOSHA compliance and inspection readiness, and proactive loss control.

Our comprehensive loss control program is available at no cost to members. Our Premium Loss Control Safety Program (PLCS), currently implemented by 73 dealerships on an average of two visits per year, has provided an average reduction of 30 percent to those dealers’ MOD factors and a responding decrease to their premium within three years.

Make sure your workers’ compensation coverage is working as hard as you do. Contact us to reduce your MOD factor today.