Case Study: Getting Your Experience Modification Factor Right

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THE CHALLENGE: How to fix an insurance company paperwork snafu that was sure to cost our client more than $120,000 immediately and untold thousands of dollars more down the line. Correcting mistakes before they hurt your bottom line is, in fact, something we do regularly. Our fine-tooth-comb reviews of claims opened and closed in the past year help our clients do just that. The point, in part, is to fix any errors in the data used by the rating bureau to set their all-important Experience Modification Factor, which is used to establish workers’ compensation premiums. What we found in this case was a big mistake by the insurer. It had failed to code a large auto-injury claim correctly, meaning our client’s “e-mod” and premiums were wrong.

How we fixed errors in the data used to set a client's Experience Modification Factor, and its workers’ compensation rate in the process.

OUR SOLUTION: The claim in this case had cost the insurer about $400,000. Not having a big claim show up in your record might sound like a positive. For a while, it might be. But the number-crunchers will eventually catch their mistakes. And if we were to turn a blind eye to it all, there was no chance of working with the insurer to try to find a way to minimize the harm to all concerned. So, we did the right and ethical thing: we gave the insurance company the heads up and got to work in negotiating an outcome favorable to all.

THE OUTCOME: Our ask wasn’t a small one. We wanted the insurer to forgive two full years of higher premiums, an amount totaling $123,147. Insurers have three years to correct their mistakes before they’re no longer able to collect for premiums that would have been owed by an insured. In this case, the insurer had already let two years pass without catching its mistake. But we believe integrity and trusting relationships matter. It’s the only way we’ve ever conducted business and, we believe, it’s why after months of advocacy by our team, we were ultimately able to sway the insurer to act in our client’s favor.

The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the U.S. An employee-owned organization, we’ve been providing our clients with the confidence to face whatever lies ahead for more than 100 years. For more information, contact us online or call 877-440-3304.

This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.

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