Occupational Health and Safety
(5 Minute Read)

Looking to save money on your insurance premiums? Let’s talk about safety.

For many businesses insurance costs can add thousands of dollars to labor costs. Naturally, most organizations would jump at the chance to lower their premiums when renewal comes around. Unfortunately, if your organization has experienced accidents or claims in the last few years, you will most likely see your rates increase. This is when a decision needs to be made. Should you go shopping for a new carrier who may offer you a lower rate? We think this is a short term solution. To create sustainable decreases in premiums, it is important to understand how carriers set their rates, and how to implement organizational changes to combat the underlying reasons that your premiums are sky-rocketing.  

How Premiums are Calculated

The basic breakdown of premiums is that they are based on the industry you are in, the quality of work each of your employees do, and your claims history. Most carriers break these down using three factors: Employee Classification Rate, Employer Payroll, and the Experience Mod Rate.

Employee Classification Rate  

The Employee Classification Rate is a 4 digit code that is assigned to industries by the National Council on Compensation Insurance (NCCI). Some states have their own way of determining this code, but the principle is the same. An example of this would be a construction company that has codes for its construction employees and their office support staff. For each of these codes, they pay a rate on every $100 of payroll [1]. For the construction staff, they may pay $13 on every $100, while for the support staff they may pay around $0.25 for every $100. The chart below shows some example codes from the state of Illinois. As you can see, depending on what classification your payroll is your premiums can differ substantially.

Employee Classification Rates
Every ECR Code equates to a different premium cost per $100 of payout


Employer payroll

A company’s payroll is directly pulled into their premium calculation. As you can see above, for each code that a company has from the NCCI, they will be charged a premium for every $100 of payroll on the books.  

Experience Mod Rate  

The final factor in your premium is your Experience Mod Rate, or Mod. It is worth noting that this is the one factor in the premium calculation that you can actively impact and turn into a decrease in your insurance costs. This number is in essence a comparison to other businesses that are in your industry. There are several factors that go into this comparison such as the  age of the business and expected loss. However, the most important element is the frequency and severity of your claims [2]. Mod Rate starts at industry average—1.0. If you have more frequent or more severe accidents your mod rate could push to a 1.2 or vice versa—less severity and frequency might drop you to a 0.8.

Let's say you have $100,000 in premium based on your classification codes and payroll. If you are at 1.0 Mod, you will pay that $100,000. If your mod is at a 1.2, your premium will come in at $120,000. And best of all, if your mod decreases to 0.8, your premium will get a 20% credit down to $80,000.  

The safer you are than industry average, the less your final premium payment will be.

Short Term Savings or Sustainable Change

With a basic understanding in place of how premiums are calculated—let’s talk about saving money. Something worth noting is that even if your mod goes up, you may be able to get a lower premium. In competitive markets, some carriers will buy up higher risk businesses to increase market share. This may mean that in the short term you will save money on your insurance. But here’s the catch: come renewal time you may find yourself facing the same predicament because your mod rate hasn’t changed. Even if you have had a particularly safe year with very few to no accidents and claims you might be surprised that your mod rate hasn't changed. The fact is, mod rate is calculated on a 3 year running basis—your incidents will stick with you and new incidents will continue to drive your Mod up.  

Of course, your organization may have a great mod rate. But stop for a moment to consider why that is. Some companies may have no major incidents but have frequent minor issues. Frequency breeds severity—eventually one of those incidents that seemed like no problem, will be a lasting dent on a company’s safety record that will affect their cost structure for years after[3]. Other companies with almost no claims and incidents may have many near misses. Being lucky is not the same thing as being safe. One of the near misses will eventually come back to bite in the form of an accident that will send mod rate up, and premiums along with it.  

Shopping around may get you short term savings on your premiums, but it is a reactive solution. Being lucky and not safe may find you saving money on premiums now, but could easily spiral in the other direction. It is time to get proactive about ensuring sustainable savings and working to drive down your Experience modifier. The only way to do that—drive a cultural change in your organization that creates a safer environment.  

Here to Help

We partner with you to drive a culture of leadership on safety issues. We start with a data driven assessment of the organization. From the management team to the team members on worksites, we get a complete picture of the safety culture. We then leverage this data and design a custom strategy to engage the entire organization to change their mindset on safety. We are there for leadership training, safety program implementation, check-ups, governance, and more. Our goal is to help foster an environment that engages employees and changes behavior to reduce both the frequency and severity of incidents. As the organization becomes safer and files fewer claims, their mod rate will decrease in turn. And that means savings that will last—no matter the carrier.

Time for a reality check. Driving cultural change may seem daunting. It requires more than a few safety posters and training sessions. And it takes time. If you are interested in a short term solution—this isn’t that. But our experts on safety and occupational health have walked alongside many organizations on this journey and seen positive results. One construction company dedicated themselves to changing their safety culture, and over the course of a few years they were able to decrease their mod rate and save 50% on their insurance premiums. If you are willing to partner with us and invest in your culture and your team—you can expect results.  

Here at Ledgestone—safety is about more than just saving money. We want to partner with you to do more than just decrease your mod rate. Yes, in the long run we can drive down your mod and insurance premiums, but there are so many co-benefits that we believe are just as, if not more, important. Changing your safety culture will also empower your people to be at their best. A happier, healthier, and safer team will drive real growth as the organization revs up to its full potential. If you are interested in transforming your culture, elevating your team, and slashing your costs we would love to have a conversation. Click the link below to learn more!  

How to increase safety



  1. Understanding NCCI Class Codes - PIIAC - Professional Insurance Agents of Colorado. PIIAC. 2019, August 30. https://piiac.com/understanding-ncci-class-codes/.
  1. Gagne, R. Understanding the Experience Modification Rate (EMR). Fit2Wrk. 2010.
  1. NCCI. ABC's of Experience Rating. NCCI. 2021.