Case Study: Lowering a Staffing Agency’s Workers’ Comp Ex-Mod Through Strategic Risk Management

Background: A Temporary Staffing Agency Facing Rising Workers’ Comp Costs

A mid-sized temporary staffing agency in California was struggling with rising workers’ compensation premiums due to a high ex-mod of 1.45. The company placed workers in manufacturing, warehousing and clerical roles, but frequent workplace injuries—particularly slips, falls and lifting-related strains were driving up their insurance costs.

The agency’s annual workers’ comp premium had increased by 35% over three years, cutting into profitability and making it difficult to compete with agencies offering lower markups to clients.

Challenge: Identifying the Root Causes of High Ex-Mod

NSM Insurance Brokers conducted a thorough risk assessment and identified key issues:

• Inaccurate Job Classification: Many employees were misclassified into higher-risk categories, leading to inflated premiums.
• Lack of Injury Prevention Programs: The agency relied on clients to provide safety training but did not have its own safety initiatives in place.
• Poor Claims Management: Several past workers’ comp claims remained open longer than necessary, increasing claim costs and negatively impacting the ex-mod.
• No Return-to-Work (RTW) Program: Injured employees were often placed on total disability instead of light-duty, resulting in higher lost-time claims.

Solution: A Comprehensive Strategy to Lower the Ex-Mod

NSM Insurance Brokers implemented a multi-step plan to reduce the agency’s ex-mod and control workers’ comp costs:

1. Correcting Employee Classification to Lower Premiums
   • Conducted a payroll audit and discovered that several workers were misclassified under high-risk categories.
   • Worked with the insurer to reclassify clerical and light-industrial roles appropriately, leading to immediate premium savings.
2. Implementing a Proactive Workplace Safety Program
   • Partnered with an OSHA-certified safety consultant to develop an agency-wide safety program.
   • Required all temp workers to complete industry-specific safety training before assignments.
   • Mandated that client sites undergo safety evaluations before placing workers.
3. Improving Claims Management and Closure Rates
   • Established a claims review process to track open claims and push for faster resolution.
   • Engaged with the insurance carrier’s claims adjusters to ensure medical treatments were appropriate and not excessively prolonged.
   • Implemented injury reporting protocols to report claims within 24 hours, reducing overall claim costs.
4. Introducing a Return-to-Work (RTW) Program
   • Designed a light-duty work program to bring injured employees back to work in modified roles, preventing unnecessary lost-time claims.
   • Worked with clients to identify alternative job tasks (e.g., administrative work) for recovering employees.

Results: Significant Cost Savings and a Lower Ex-Mod

Within 18 months, the staffing agency saw dramatic improvements:

• Ex-Mod Reduction: Decreased from 1.45 to 1.10, significantly lowering premiums.
• Workers’ Comp Premium Savings: Annual insurance costs dropped by 28%, saving the agency $250,000 per year.
• Fewer Workplace Injuries: Recordable injuries declined by 40%, reducing overall claims.
• Faster Claim Closures: Average claim resolution time improved by 35%, preventing lingering costs.

Conclusion: The Value of a Strategic Insurance Broker

This case highlights how an experienced insurance broker can drastically lower a temp staffing agency’s workers’ comp costs by:

• Correcting job classifications to prevent overpaying.
• Implementing proactive safety programs to reduce injuries.
• Managing claims aggressively to control costs.
• Leveraging return-to-work programs to minimize lost-time claims.
• Negotiating better insurance terms based on improved risk management.

By taking a proactive approach, the staffing agency became more competitive, reduced costs, and improved profitability.