Key takeaways:
What’s your workers compensation policy worth? Many business owners assume the answer depends entirely on what happens if an injury occurs. Does the carrier pay the claim? But every work comp carrier has to follow the same state statutes on coverage, limits, and benefits – so that part of your policy looks similar no matter who you buy from.
The real differences show up everywhere else, whether you experience a claim or not.
On this episode of the WorkSAFE Podcast, we’re joined by Erin Stober, AVP of Underwriting at MEM, to talk about what actually determines the value of a work comp policy, and why the lowest premium isn’t always the best deal.
5 components of the value of your workers compensation policy
Here are the five components that add up to that value, with real examples of how they play out for two very different businesses.
1. Premium: Your base cost
Your premium is the price you pay for your work comp insurance. It’s likely the first thing you look at when evaluating carriers with your agent.
It’s important to understand how your premium is calculated. Your payroll, classification rate, and experience modification factor (e-mod) all factor into the price of your policy. Your carrier charges a specific rate based on the type of work your employees do (class codes).
📍 Read next: How Your Workers Compensation Premium is Calculated >
Then we add your e-mod to the equation. The National Council on Compensation Insurance calculates this number in many states, using your past losses to predict future losses. If your e-mod is higher than 1.0, your losses are worse than expected for businesses like yours. If it’s lower than 1.0, your losses are better.
Premium = payroll x classification rate x e-mod
Preventing injuries lowers your e-mod and helps control your premium. From there, your carrier might make additional adjustments as your policy year unfolds.
But premium alone doesn’t show the full picture of a policy’s value. For examples, let’s look at a large manufacturing company and a small dental office.
Example: Large manufacturing company
| Total premium | $350,000 |
Example: Small dental office
| Total premium | $2,600 |
2. Safety consultation services: Preventing injuries
Premium is only the starting point. What your carrier does to help you avoid claims in the first place adds a second layer of value.
There’s a direct relationship between your safety record, the price you pay, and the resources your carrier devotes to your account. A valuable insurance partner would rather help you prevent injuries than manage claims. A claim means someone had a potentially life-changing injury, and it costs both you and the carrier. That’s why savvy business owners choose carriers that are proactive about safety support where they need it most.
Our safety and risk experts spend time with policyholders identifying their biggest risks and helping them prevent injuries.
For the dental office example, that support is worth about $150 a year, the value of time spent consulting virtually on workplace safety improvements. For the large manufacturer, it’s closer to $2,500 a year, reflecting custom safety training or help launching a new safety program.
Example: Large manufacturing company
| Total premium | $350,000 |
| Safety consultation services | $2,500 |
Example: Small dental office
| Total premium | $2,600 |
| Safety consultation services | $150 |
3. Special programs that put money back in your pocket
Safety consultation tells you where your risks are. The right carrier goes above and beyond to help you address them.
Here’s a real test of whether your carrier believes in safety: Do they put dollars toward your most important safety initiatives? At MEM, our safety grants do just that.
Any policyholder can apply for a grant to fund equipment that improves safety. For every dollar you spend on an approved purchase, we match it, up to $10,000 per award. After 10 years of safety grants, MEM data shows that grant recipients achieve, on average, a 96% reduction in claims related to the intervention purchased.
Learn how MEM Safety Grants can help you prevent injuries and positively impact your operations >
And grants aren’t the only savings lever. Some carriers have partnerships or endorsements that give you discounted access to solutions that prevent injuries. MEM policyholders get discounted access to a variety of safety services:
- Post-offer employment testing to screen out injury risk before a new hire starts
- Post-incident drug screening solutions
- Background checks and behavioral testing for new hires
These are smaller line items than a grant, but they add up if you’re hiring regularly.
📍 Read next: Endorsed Safety Solutions >
For our examples, say both policyholders got safety grants. Our manufacturer implements safe lifting equipment for a total cost of $25,000, so MEM pays $10,000 and they contribute $15,000. Our dental office buys new ergonomic chairs for their hygienists for $8,000 total, and MEM pays half.
Example: Large manufacturing company
| Total premium | $350,000 |
| Safety consultation services | $2,500 |
| Money-saving programs | $10,000 |
Example: Small dental office
| Total premium | $2,600 |
| Safety consultation services | $150 |
| Money-saving programs | $4,000 |
4. Specialized claims services to support recovery and control costs
Grants and consultation help prevent injuries. But if one happens, the value of your policy shows up in how the claim gets handled.
If a workplace injury occurs, you can manage the claim to reduce its cost and its effect on your premium. Seeking the right medical care, reporting the claim quickly, and investigating the incident all help.
Some carriers offer claims services that add extra value:
- Special claim reviews
- Return-to-work programs
- Subrogation recoveries
- Dedicated nurse case managers
- Fraud investigation
The value of these services depends on how many claims you have. If you have very few claims, congratulations! Your hard work, along with our safety services, is paying off. If you still have room for improvement or just had a rough year, our claims experts will ensure you have the tools you need to successfully manage your claims.
It’s hard to assign value to some of these services, but let’s imagine this: Our large manufacturer has hundreds of employees in higher-risk jobs, so the value of special claims services could run $12,000 in one year. That might sound like a lot for MEM to invest in one business, but the average cost of a workplace injury is about $48,000. If we can help you manage your claims well, it’s worth every minute of our time.
Our dental office, with a few low-risk employees and no extraordinary claims this year, didn’t need any special services.
📍 Read next: Claims Management: How MEM Supports You After a Claim >
Example: Large manufacturing company
| Total premium | $350,000 |
| Safety consultation services | $2,500 |
| Money-saving programs | $10,000 |
| Special claims services | $12,000 |
Example: Small dental office
| Total premium | $2,600 |
| Safety consultation services | $150 |
| Money-saving programs | $4,000 |
| Special claims services | $0 |
5. Medical bill processing savings
The last piece connects directly back to how well your claims get managed. A carrier’s medical bill review process checks codes, catches errors, and applies network rates, which helps keep the reported cost of a claim from running higher than necessary.
That matters because claims cost drives your e-mod, and your e-mod is a direct multiplier on your premium. Even a modest, sustained improvement in your e-mod is worth real money at renewal.
Say better claims and medical management help reduce your e-mod by 0.05 points. For our manufacturer’s $350,000 premium, that’s roughly $17,500 in a given renewal year. And since e-mod reflects three years of claims history, an improvement like that echoes across more than one renewal, not just one. For our dental office’s $2,600 premium, that same single-year impact is about $130.
Example: Large manufacturing company
| Total premium | $350,000 |
| Safety consultation services | $2,500 |
| Money-saving programs | $10,000 |
| Special claims services | $12,000 |
| Medical bill processing savings | $17,500 |
| Total added value | $42,000 |
Example: Small dental office
| Total premium | $2,600 |
| Safety consultation services | $150 |
| Money-saving programs | $4,000 |
| Special claims services | $0 |
| Medical bill processing savings | $130 |
| Total added value | $4,280 |
📍 Read next: 4 Proven Ways to Reduce Your Workers Compensation Costs >
The value that’s harder to put a number on
The five components above are, for the most part, calculable. A few other things matter just as much in valuing your work comp policy – even without a dollar figure attached.
Financial strength. A policy is only as good as the carrier’s ability to pay claims years from now, not just this year. MEM carries an A- rating from AM Best, reflecting long-term financial stability.
Staying power. MEM has been a dedicated work comp provider for more than 30 years, and some policyholders have stayed with MEM that entire time. That kind of focus means the people working on your account aren’t splitting attention across other lines of insurance.
Coordinated, in-house support. Safety consultation, claims, legal, and nurse case management are all in-house at MEM, all in your region. You’re working with one team that knows your account, not being routed between vendors who can miss nuance and inflate claim costs.
In-house premium audits. Many multiline carriers outsource premium audits to third-party firms that are incentivized for volume, not accuracy. Those firms don’t know the nuance of your account, your industry, or your operations. MEM’s premium consultants are in-house and regional, ensuring smooth, reliable audits.
“We really take pride in our premium consultants’ skill and their ability to partner with our policyholders – to make sure the class codes are correct and everything is right,” Stober said. “It’s really policyholder centric.”
📍 Read next: Premium Audit: What to Expect >
Snapshot: The value of a workers compensation policy
These pieces add up to real value for the policyholder. For the dental office, the total added value exceeds the annual premium. When a carrier is truly invested in your outcomes, that value continues to show up over time.
Signs your carrier is delivering ongoing value:
- They review your claims trends with you, not just at renewal
- Your safety consultant reaches out before a claim happens, not only after
- Claims and legal support are in-house, so you’re not routed to a third party
- Premium audits are treated as a check-in, not an adversarial process
Stober summed it up: “One of the strongest indicators of whether your work comp carrier is invested in your long-term success is whether they act as a partner to you, rather than simply an insurance provider.”
That’s why it matters to choose a carrier seeking a long-term partnership with you, not just a one-year contract.
Want a practical checklist for evaluating your next carrier? Read: 6 Things to Look for When Choosing a Work Comp Company >
Frequently asked questions: Value of a work comp policy
Is workers compensation about more than price?
Yes. Every carrier must meet the same state requirements for coverage, so what happens if you have a claim looks similar no matter who you choose. Price is what you pay upfront. The real value comes from safety consultation, claims support, safety grants, and medical bill savings – all the things that affect your bottom line whether or not you ever have a claim.
How is my workers compensation premium calculated?
Premium equals payroll multiplied by your classification rate, multiplied by your e-mod. Learn more about how premium is calculated.
What is an e-mod, and why does it matter?
Your experience modification factor, or e-mod, compares your company’s claims history to similar businesses. An e-mod above 1.0 means your losses are worse than expected; below 1.0 means they’re better. A lower e-mod helps control your premium.
Are MEM Safety Grants available to every policyholder?
Yes. MEM policyholders can apply for a grant to fund safety equipment or facility upgrades, and MEM matches approved purchases dollar for dollar up to $10,000.
How often should I review my policy’s value?
At minimum, review it with your agent at renewal. Carriers that offer ongoing trend reviews make it possible to catch patterns and adjust safety priorities throughout the year, not just once.