The Zero Cost, Easiest Way To Reduce Your Experience Modification Rate
Updated: Feb 26
Early Is Easy!
When I was coaching youth soccer for a dozen years, I always drilled home to our players the phrase “early is easy.”
The idea is that taking your time with the ball makes the game hard for you and your teammates. But, playing quickly (passing early) makes the game seem like a breeze.
The longer the player holds the ball the more time the other team has to organize themselves and do the things they need to do defensively to thwart an attack and win the ball back. The defense has more time to catch the player with the ball (close them down), make a tackle, and try to win the ball back. Also, the defense has more time to find and mark attacking players without the ball (organize their defense).
Playing (passing) the ball to a teammate early keeps the defense scrambling and shifting to organize according to new dynamics on the field. The teammate who eventually receives a pass early will have more time and space in which to receive that pass and control the ball, get her head up to see the field, and make a better decision than she would under more pressure (due to receipt of a delayed pass).
Early makes the game easier. Early is easy!
Report Your Workers Compensation Insurance Claims To Your Work Comp Carrier ASAP (EARLY)!
If You Report Workers' Compensation Claims Within A Week Of The Accident Date, You Reduce Claim Costs Between 18 & 45%.
Reporting your claims earlier costs you zero dollars. Likewise, reporting your claims early costs you zero time. You’re going to report claims at some point anyway. So, early doesn’t cost you any additional time.
We’re just going to adjust when you file your first report of injury on or as close to the accident date as possible.
There’s your answer. If you stop reading at this point and accept this recommendation on faith, you will benefit tremendously through decreased claim costs. And, in turn, you will enjoy a lower Experience Modification Rate.
Note: If you are unfamiliar with Experience Modification Rating, our Experience Modification Rate FAQ page will be a good resource for you.
If you’re like me, on the other hand, and need to know the data behind the claim (dual meaning there!) that early reporting will benefit you and your Experience Modification Rate, then keep reading.
What Does The Data Say About Early (And Late) Reporting Of Workers’ Compensation Claims?
The Hartford Study
The Hartford published a study in 2000  on reporting lag and the cost of claims. Some of the major findings were:
Claims reported in the first week following the accident date had the lowest settlement value.
Claims reported in the second week after the accident date had average settlement values 18 per cent higher than those reported in the first week.
Claims reported in weeks 3 and 4 following the accident date had average settlement values approximately 30 percent higher than those reported in the first week.
If you waited and reported claims beyond week 4 (a month or more), settlement values were 45-per-cent higher on average than week 1.
NCCI published its own study on reporting lag and claim costs in 2015 . Their study featured a larger data set from 2010 and 2011 as well as more robust detail. For example, NCCI delivered results by grouping data into subcategories (below) to give an even more comprehensive view on the effects of reporting lag:
Overall claim costs
Distribution of claims
Percentage of claims by nature of injury
Share of medical
Percentage with attorney involvement
Percentage with lump-sum payments
What we find in the NCCI results is similar to the Hartford study; reporting lag and claims costs are positively correlated. The longer the reporting lag the higher the claim costs. A couple of the findings we think noteworthy are summarized below.
The data on Sprains and strains account which account for 46% of all claims (fractures, contusions, and lacerations 54% combined) confirm the results that The Hartford reported (as do the other injury types):
Remember “Early Is Easy?” Look at the rise in percentage of claims with attorney involvement as the reporting lag increases (below). This suggests the ease of resolving a claim dramatically increases the earlier you report the claim. Or, the difficulty in resolving a claim dramatically increases the longer you wait to report.
(Note: No Lag means claims reported on the day of the accident. These claims are not factored into Week 1 reporting lag analysis. They are expected to be high cost due to the fact that most “no lag” claims are serious injuries requiring emergency, immediate care which will trigger notification to your insurance company.)
The Reporting Lag Compound Effect On Your Experience Modification Rate; Twilight Zone Phone Calls.
The literature supports the idea that delayed reporting of work comp claims results in increased overall claim costs and delayed employee return to work. Likewise, per the NCCI study, reporting lag is also correlated to:
Increased incidence of attorney involvement
Increased cost of indemnity as a percentage of claim cost
Drop in closure ratio of claims after 18 months
Open Claims On Your Experience Modification Rate Worksheet
Remember that your Experience Modification Rate is calculated with both your closed and open claims. The difference between the 2 is paid value versus incurred value.
Your closed claim values are composed of paid losses; the amount your insurance company spent on the claim.
Your open claim values are based on incurred losses; the amount your insurance company has spent on the claim plus reserved losses (Money your insurance company has set aside for future payments).
The reporting lag compound effect on your Experience Modification Rate arises from your open claims. In addition to the actual paid expenses being higher, there is evidence that your claim reserves will be higher as well.
James Moore is a colleague of mine and a very experienced claims adjuster and claims manager. He coined the term "Twilight Zone Phone Calls" and wrote of this issue in a post "Twilight Zone Phone Calls Reduced By Fast First Reports Of Injury."
According to James, Twighlight Zone Phone Calls go like this:
"Hello, this is***Medical Provider****. We have ***injured claimant*** here for ***some type of treatment***. We were just calling to authorize the **medical treatment***"
These calls represent the first an adjuster is hearing about an injury; having never received the first report of injury. And, these calls are a sure way for "the claims staff set very high initial reserves."
You've created a number of problems for the adjuster which you can read about in James' post, but the biggest problem of them all, in my opinion, is probably that you've put the adjuster in a position of "authorizing something without having fully investigated the file." Higher reserves will be the result.
Don't forget "Early Is Easy!" Adopting this mentality will help your adjuster and, in turn, you and your Experience Modification Rate.
By the way this Reporting Lag Compound Effect is a common reason why you'll see open workers' compensation claims reserved for, say, $90,000 that are later closed out for $45,000.
Conclusion: Early Is Easy! (And It's Good For Your Experience Modification Rate)
Early claim reporting is critical to drive down workers' compensation costs and your Experience Modification Rating. Reporting Lag has been demonstrated to increase workers' compensation claim costs across all injury types.
In addition, early claim reporting can eliminate the frustrating and expensive challenge of having over-reserved claims hurting your experience modification rate. This can be remedied, but you have a small window of time to fix these issues before they are reported for Experience Rating purposes. Needing a technical expertise in claims and the ability to work fast makes it necessary for nearly all employers to have an expert perform a Reserve Audit.
Try taking all of your claims for, say, the last 3 years and record the lag time (days between injury date and report date). Average those numbers and start tracking your average Reporting Lag. You can use the average reporting lag to gauge this aspect of your post-injury response, reduce claim costs, and reduce your workers' compensation Experience Modification Rate.