Insurance protects a business when the unexpected happens. But business owners often look at the premium as if it is simply a number handed to them at renewal. The market matters. Rates matter. Coverage matters. But that is only part of the story.
The way a company operates also matters. Claims, loss trends, safety performance, return-to-work practices and the overall quality of a risk program can influence how an organization is viewed by insurers and how much it ultimately pays for risk.
“What am I doing operationally that influences what my insurance costs?”
One place to see the connection: the EMOD.
For many employers, the experience modification factor, commonly called the EMOD, provides a practical example of how loss performance can affect workers’ compensation cost. Depending on the state, the rating may be administered through NCCI or another authorized rating organization. The important point for a business owner is the same: your own loss experience is compared with what is expected for similar businesses.
An EMOD of 1.00 generally represents expected or average performance. Better-than-expected loss experience can produce a factor below 1.00, while worse-than-expected experience can push the factor above 1.00.
Assume an electrical contractor has a $10,000 workers’ compensation manual premium. If its experience modifier is .80, the modified premium would be $8,000 before other applicable adjustments. At a 1.20 modifier, that same $10,000 becomes $12,000. The underlying business did not change. The difference is how its loss experience is affecting the cost.
The impact can extend beyond the insurance bill.
For contractors and other businesses that compete for work, risk performance can affect more than premium. An experience modifier may be reviewed during prequalification or bidding, and a poor loss history can create questions about how the organization manages its people and operations.
That means a strong risk strategy can create value in more than one direction. It can help protect employees, reduce avoidable claims, strengthen the story presented to carriers and support the company’s ability to compete for opportunities.
Risk management should show up in the numbers.
The goal is not simply to “have a safety program.” The goal is to build operational practices that produce better outcomes. Fewer preventable losses. Better claim execution. Stronger documentation. More credible conversations with underwriters and carriers. A business that can explain why its risk deserves to be viewed differently.
That is where commercial insurance and risk management should connect. The insurance program reflects the business, and the business has more influence over that reflection than many owners realize.
Commercial Insurance & Risk Management
Risk management should show up in the numbers.
Reducing claims is important. But an effective risk strategy can also improve how a business is viewed by carriers, customers and the marketplace.
Start a Conversation →