Workers’ Compensation, Experience-Modifier and How Litigation Is Adding to Your Claims Insurance costs for auto, garage liability, EPLI and Workers’ Compensation (WC) continue to climb. For WC policies effective Sept. 1, 2025, the California Department of Insurance has approved a rate increase of about 9%. Other states are also in the same league. It is a good time to learn how premiums are calculated and how to reduce them. BACKGROUND WC insurance is mandatory in the United States and many other countries. It ensures employees receive medical treatment and disability benefits for workplace injuries, while protecting employers by providing immunity from employee lawsuits for alleged negligence. WC premiums are paid entirely by employers and represent a significant, manageable business expense. Rate increases are attributed to significant increases in legal expenses (see the ads on the sides of the highways), rising medical and claims costs, more cumulative trauma claims and increased claim adjustment expenses. COST CONTAINMENT WC premiums are calculated using a base rate that reflects job duties, payroll size and the number of employees. This base rate is then adjusted by an experience modifier (X-Mod) that is directly tied to the frequency and severity of workplace injuries. Losses are calculated from claims paid by the insurance company, so every claim impacts your premium for multiple years. Preventing injuries is the most effective cost-control strategy. We assume you are running a lean operation with payroll expenses under control. PROACTIVE STEPS Reducing both injuries and claims starts with a proactive approach to safety and claims management. Employers should: • Form and maintain an active safety committee. • Designate an approved medical clinic. Seek a clinic approved by your insurance carrier and post details on your employee notice board. • Encourage open communication. • Document thoroughly: • Accident investigation • Employee statement of injury • Employee counseling • Declination of treatment by employee • Verify coverage for contractors working on your premises, e.g., detail company, gardeners, etc. Get coinsured on their policies. Your WC policy covers only employees on your payroll! By Sam Celly, MS, JD, CSP, President and CEO, Celly Services Inc. 14 SAN DIEGO DEALER
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