What is an Experience Modification Rating and how does it impact your Commercial Cleaning or Janitorial Services Company?

Businessman pointing five star symbol the level of his businesses experience modification rating for workers compensation insurance.

Experience Modification Rating

The Experience Modification Rating of a business is the main factor an insurance carrier uses to determine what to charge a business for Workers Compensation Insurance Premium.  The positive or negative aspects of a businesses rating will result in either a credit or a debit applied to what the business pays in workmans comp premium. There are many terms business owners and people in the insurance industry might use to refer to this rating. Those terms include:  experience mod, experience rating, e-mod, EMR, and sometimes it is just referred to as the mod. The rating is determined by the amount of losses a business has compared to other businesses in the same industry and classification code. Because this rating is one of the few aspects of your insurance premium that the business has control over it is important to know exactly what it is and how you can improve it.

Janitors Station: The cleanliness of this station contributes to the experience modification rating of this business.

The Formula for an Experience Modification Rating

The formula that most insurance carriers in most states use to determine an experience modification rating for a business is:  Total Adjusted Actual Losses ÷ Total Adjusted Expected Losses = Experience Mod.

The total adjusted actual losses is determined by adding the actual primary losses + the stabilizing value + the actual ratable excess losses.  To calculate the total adjusted expected losses you would take the expected primary losses + the stabilizing value + the expected ratable excess losses.

If you do not know these amounts for your business your insurance agent or someone at the insurance carrier should be able to help you find these numbers. If they do not have access to them they should be able to put you in touch with someone who does or they should be able to help you determine them yourself.

Time Period for claims used in an Experience Modification Rating

The Experience Modification Rating is generated 60 to 90 days before the rating effective date. It uses the loss histories of a third year period not including the most recent term.  That means policies that have an effective date (the date the policy is active) that is no less than 21 months prior to the rating effective date. It also means that the three years being analyzed do not include a term more than 57 months before the rating effective date.  In simple terms this means the policies that begin within 21 and 57 months before the rating effective date will be used in the calculation for an experience modification rating. This time period is established because it will prevent injuries that have recently happened or even claims that are still open from being considered for this data.  Because this is how the calculation is determined, it is important to limit the frequency and severity of claims.  An effective safety program is extremely important to limit these claims.  If your business has a year in which it has a high frequency of claims or a severe claim, it will stick with your business for several years.

A hand clicking excellent rating on virtual screen to symbolize a businesses experience modification rating.

Who calculates the employers Experience Modification Rating?

The experience mod factor is generated by the National Council on Compensation Insurance (NCCI). As of 2017, 35 out of 50 states use this organization to assist in determining the experience modification rating for businesses and the recommended premium for individual classification codes.

11 states have their own method or a state run department to determine this formula and to administer the Workers Compensation System. Many of the states who do not use NCCI are states with extremely large economies like California and New York. These states have determined they can do it more efficiently through a department within the state government.  States that use NCCI, for the most part, have average workers comp ratings noticeably lower than states that do not partner with NCCI.

There are 4 additional states that are monopolistic states. These states include:  North Dakota, Ohio, Washington, Wyoming, Puerto Rico, and the U.S. Virgin Islands.  According to the International Risk Management Institute (IRMI) Monopolistic States are defined as: “Jurisdictions where an employer must obtain workers compensation insurance from a compulsory state fund or qualify as a self-insurer (as is allowed in two of the jurisdictions).”  This means that monopolistic states do not recognize other states workers compensation system and require business to purchase coverage within the state if businesses want to do business legally within the state. For businesses that do businesses in multiple states and one of the states is a monopolistic state, you need to purchase coverage in the state you operate and, in most cases, the state you do business in that is a monopolistic state.

The Experience Modification Rating is a mandatory plan if the insured is qualified.

In order to qualify for an experience rating the insured business must have paid a minimum amount of premium determined by the state within the most recent 24 months of the rating period. This means the business must be in business for two years before NCCI and the insurance companies can determine what their rating is.



Squeaky Clean: Return to Work Program

Squeaky Clean | Return To Work | Janisure.com

What are the benefits of having a well developed Return to Work Program?

Safety programs are an integral part of any small business.  By incorporating a return to work plan into a safety program a business can make an enormous impact on employee morale and limit the losses related to employee injuries.  Limiting the amount of time an injured employee is away from work can help your business in many ways. First and foremost, it will help the injured employee regain their normal routine and give them a feeling of self worth. This is crucial to getting them back to work and contributing to the organization again.  Humans are creatures of habit and the longer an injured worker stays off the job, the more time they have to create new habits.  When injured employees create new habits, they are less likely to return to full time employment. This is when an insurance claim can really get out of hand and have extremely negative impacts on your business. Here are several tips to help your small business prepare for and execute an effective return to work program.

Squeaky Clean | An effective Return to Work Program can benefit a small business in many ways. | Janisure.com

Before an injury takes place

Develop a formal return to work program

Most businesses have formal safety programs. When a business develops or revises their safety program, it is a great opportunity to incorporate plans for returning injured employees to the job in the unfortunate event they are injured. People are creatures of habit and the longer an injured worker stays off the job, the longer they have to develop new habits away from their work life. This is when insurance claims can get out of hand when an injured worker stays off the job long term or completely. This can have negative impacts on your businesses experience modification rating, which is the main factor insurance carriers use to determine what to charge businesses for premium.

Identify potential temporary light-duty assignments 

The more light duty tasks you have in place for injured workers, the more likely they are to return to permanent work. For your business, the most important aspect when you have an injured employee is to get the injured employee healthy and to get them back on the job in any capacity as soon as possible. This will limit the damage to your experience modification rating, which is the number one factor insurance carriers use when deciding what to charge your business for premium each year.

slips trips falls infographic page-promo about return to work.

When an injury occurs

Start the plan immediately upon injury/illness

Most workers compensation policies require a first report of injury form to be filled out quickly. This will help the nurses and doctors provide the best medical care to your employer, it will help the insurance carrier process the claim in a timely manner, and it will help your employee get back on the job sooner and in better health.

Take care of your employee

Healthy employees are happy and productive employees. Saying you care about an employee means far less than showing them you care when the time comes to help an injured worker. Taking care of the employees will give your business the opportunity to show the injured worker and other employees that you care about their health and well-being. This can help your business with retention of all employees and it will help the injured employee to recover from their injury as fast as possible. Most importantly taking care of your employees is the right thing for any business owner to do.

Post injury

Report the injury promptly

The quicker you report the injury, the quicker your insurance carrier can process the claim and get your employee the help they need and deserve. It is important to notify both your agent and the carrier, but do not be alarmed if your agent tells you to call the carrier. Processing the claim is the job of the carrier, not the agency. Your agent should be able to put you in touch with the proper person or department at the carrier to get the process expedited. It is also important to keep the agency in the loop in case the carrier does not live up to their obligations.

Develop a process for Communication throughout the process

When an injury occurs, it is important to communicate with everyone involved what is going on. It is important for the business owner and key employees to know exactly what the workers compensation process is and what they should or should not say to employees. It is equally important to communicate with your employee, the hospital, the insurance agency, and the insurance carrier. The more communication the better when it comes to getting an injured worker the care they need and the insurance claim processed in a timely fashion.



Squeaky Clean: Why a Safety Program?

Squeaky Clean | Safety Program | Janisure.com

Why should a commercial cleaning company be concerned about implementing a safety program?

A well-documented safety program can help your cleaning business in many ways. First and foremost, it is the right thing to do for the health of your employees. Healthy employees are happy and productive employees. Implementing a safety program will help keep your employees feeling positive and keep those employees with your company for many years, but your employees are not the only ones who should play active role in the creation and implementation of safety initiatives. The small business owner, senior management, and supervisors all need to participate. This is the only way to foster a safety-minded culture throughout your cleaning business. Here are several reasons why you should implement a safety program into your commercial cleaning company and what it should include.

safety program

Why should you want to implement a Safety Program?

Employee Morale

Healthy workers are productive workers.  Taking time out of the businesses work day to direct all employees attention to a safety program is the best way to foster a safe environment throughout your company. Including everyone within the business in these meetings is the best way to foster a staff that takes the safety program to heart. It is also a great way to make sure your business is compliant with OSHA guidelines. Complying with OSHA Guidelines is the law no matter what state or industry you operate in.

Less Frequent and Less Severe Insurance Claims

When less insurance claims occur within a business, it has a positive impact on the experience modification rating of that business. This rating is the main factor insurance carriers use to determine what to charge a business for insurance premium. Less frequent and less severe claims will positively impact this rating.

Damage to a client’s property and the businesses equipment 

Keeping your employees safe will ultimately lead to those same employees being careful in general. When employees knows to take their own personal safety, they will be equally careful to not damage the equipment of the business or the property of a client you are working with.

A Safety Program is an important way to keep all employees healthy and productive.

What should be a part of the Safety Program?

Driver Safety

If your employees spend any time behind the wheel, they should have training with specific instructions how you want them to drive will on-the-clock. It is important to never assume your employees are safe drivers or that they have the same opinion of what is and is not safe. Pulling their driving records periodically is an important part of any driver safety program.

Heavy Lifting

Not all employees will need to do heavy lifting.  It is important to let all employees know that they should not over do it when it comes to heavy lifting. This is not an easy thing to do with many employees. Smaller employees frequently want to show they can do equal worker, but when it comes to heavy lifting employees need to know their limitations.

Ladder Safety

Not all commercial cleaning companies have a need to use ladders as part of their daily operations, but those that do need to make sure the employees know how to use them properly. It is equally important to let those employees know why they should use the ladders properly and that it is more important to work safely than to rush through their daily tasks.

Return To Work

A Return to Work Program is one aspect of a safety program that frequently is left to the end or even left out altogether. This is a mistake, because even the safest companies eventually have an injured employee. How you treat the employee and transition them back in to the organization will have a huge impact on how long they stay away from work, or if they will return to work at all.  Getting employees back on the job, even on a limited basis, is extremely important to control claims and limit what you pay for insurance premium.

How can Pay as You Go Benefit my Business?

Pay as You Go

What is Pay as You Go Workers Compensation and why might a Commercial Cleaning Company want to use it.

What is Pay as You Go Workers Compensation?

Pay as You Go Workers Compensation Insurance is an alternative payment option that allows commercial cleaning and janitorial services companies to pay their insurance premium monthly instead of in a lump-sum payment. This alternative payment option allows seasonal and cash-strapped businesses to get coverage in place at a much lower cost and to increase the accuracy of their payments by allowing the business to pay workers comp premium based on the actual payroll from the previous month.

Pay as You Go Workers Compensation

How is Pay as You Go Workers Compensation Different?

A traditional workers compensation program requires a business to pay a portion of the premium up front just to get the policy in place. This amount is often 25% and some times as much as 33%. Depending upon the revenue of your business, this may be a substantial amount your business is required to pay just to get coverage in place. After making this large payment, the rest of the premium is paid in 9 monthly payments over the course of the last 9 months of the term.  A Traditional Workers Compensation Insurance Policy determines your monthly payment based off of the estimated payroll from the previous year or an average of monthly payroll over the past few years.  There are many factors that may make the man hours of your business considerably different from year to year. Pay as You Go Workers Compensation Insurance allows a business to prevent get a policy in place at a lower initial cost and increases the accuracy of the payment each month.

How can a Janitorial Services Company benefit from Pay as You Go?

Commercial Cleaning and Janitorial Services Companies benefit from a pay as you go policy in three main ways:  less up front costs, more accurate monthly payments, and less risk of being audited mid-term.

Having a lower up front cost allows start-ups, cash-strapped, and seasonal cleaning companies the ability to get coverage in place and pay their premium throughout the year as they gain more positive cash-flow. Their may be a number of reasons why cash is tight within a business and pay as you go is a great way for businesses to get legally required workers comp coverage in place at a lower price then a traditional workers comp policy.

Because a pay as you go workers comp policy allows your business to partner with a payroll company to accurately pay your premium each month, there is less risk for a mid-term audit. With a traditional workers compensation policy the monthly payment is based upon an estimate of payroll from the previous year or the previous few years. This results in a business either over or under paying for premium throughout the year. If there is an underpayment, the business will owe the extra premium at the end of the term. If it appears that there is a significant underpayment in place, the insurance carrier may require a mid-term audit to adjust the payment. A mid-term audit takes your employees away from their daily routine to help the inspectors adjust the premium payment.  This is time that is spent by your employees on activities that are not making the business profitable. The more accurate the premium payment is through a pay as you go policy, the less likely your business is to experience a costly mid-term audit.