Proper Analysis Is The Key To Understanding Workers’ Comp Costs

Chris Dik – V.P. Sales Management

In order to reduce your workers’ com­pensation costs, you have to analyze where you are and how you got there. By doing so, you’ll be able to determine how to handle any problems. The mistake that many busi­ness owners make is skipping this step and trying to throw anything and everything at the problem, before they even understand what the problem is. Properly analyzing your workers’ compensation data will make fixing the problem that much easier.

The first step is to examine your workers’ comp experience modification rating. Your experience modification rating (or ex mod) is typically determined by analyzing data from the past four years. Your ex mod is based on the amount of your payroll, the different job classifications being used, the number and type of claims that the business has had, and how much those claims cost.

Your ex mod is compared to other com­panies in the same industry as yours, so you are only being compared to those with similar businesses. Your loss experience is compared to the loss experience average of the group you are in to determine your company’s experience modification rating.

In order to lower your ex mod rating, and therefore your costs, you want to determine if the information taken into consideration is correct. Is the payroll correct? Are the job classifications accurate? Did all of these claims actually happen, and are the claims amounts correct? This data is available from the Workers’ Compensation Bureau. But keep in mind, it can also be incorrect. So do your analysis.

Now that you have all of this data in front of you, you’ll need to determine what it all means. Can you see that the issues driving your costs up are due to a lot of smaller claims? Is the issue just one big claim? Do the claims tell a story? Does the same type of claim keep recurring?

Through this process we often see that there is a pattern in the claim frequency. It might be that the vast majority of the claims are coming from the same department. It might be that there are similar accidents, like slip and falls or cuts. Once you notice the pattern, you can start to find ways to address it with simple safety measures and awareness. For example, if the accidents all happen at the end of the day when time is a factor and employees are fatigued, you may need to develop processes to help prevent that rushed feeling and you may need to educate your managers about why they shouldn’t rush employees. It’s very difficult to recognize these patterns without having all of the data in front of you, so this is an incredibly important part of the cost-reduction process.

We use analytics to show the business owner how much each claim actually cost them. What most business owners don’t realize is that this cost is usually double what the actual injury cost was because a paid claim impacts the cost of your premium for the next three years.

Good analytics tell the story of a business’ work safety and will usually lead you to a natural plan to fix the problems that have been identified. Your analytics can act as a compass pointing you to the specific actions that you need to take in order to reduce your workers’ comp costs.

The final step in the analysis process is to determine what services or procedures should be utilized to solve the problem. There are a variety of services and proce­dures that can address most issues. We have a solid history of fixing workers’ com­pensation issues with quality services, like our Risk Management Center, which have proven to be successful.

Remember, before you can fix the issues causing your worker’s compensation costs to escalate, you need to analyze the data, verify correctness, identify patterns, and take steps to prevent those patterns from continuing. By focusing on your analytics you’ll be able to address these issues faster and with more efficiency.


Should you have any questions about this article – or any insurance matter – please feel free to contact me at or call me at 508-753-6353 Ext. 112.

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