Understanding the Principles behind Experience Modification

Property Tax

If the mere mention of the experience modification formula makes your eyes glaze over and your head ache, this article is for you. While the formula itself may seem completely intimidating, the underlying concept of experience modification is actually pretty simple.

Thomas Auchter, our resident expert on experience modification, recently shared his understanding of the concept in a way that I think we can all relate to.

Let’s say that you have two pizza restaurants within a block of your house and that the average injury rate for workers in a pizza restaurant is 5 people per year. Let’s also assume that the average total value for claims filed per year is $5,000 and that both restaurants have 15 employees.

Now, restaurant A’s owner is a risk taker. He thinks workplace safety is a hassle and spends little time training his employees on how to avoid accidents.

As a result, he has had 10 employees injured over the past year. Each of these injuries resulted in the employees filing claims to cover medical expenses and lost wages on his work comp policy. These claims added up to $20,000 for the year.

Restaurant B’s owner takes a different approach. He prioritizes his employees’ safety and holds monthly workplace safety meetings. He has signs demonstrating proper procedures at the meat slicer and he has warnings posted on the pizza oven – the two locations in his restaurant where employees are most likely to be injured.

His efforts have paid off. He has had only one employee injured in the past year. This employee filed a claim for medical benefits, but lost no wages and the resulting claim equaled $1,000.

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