The experience modification rate plays a significant role in the cost of workers compensation insurance premiums. This figure represents an employer’s workers compensation claims history compared to other businesses of a comparable size in the same industry.
What does your experience modification rate say about your company?
A mod factor greater than 1.0 is a debit mod, which means that your losses are worse than expected for your industry and a surcharge will be added to your premium. A mod factor less than 1.0 is a credit mod, which means losses are better than expected, resulting in a discounted premium.
The mod depends on these components:
1. Actual losses from the three prior policy periods, not including the most recent policy period
2. Expected losses based on payroll and expected loss rates for the industry
3. The amount of each loss – severity.
4. The number of claims – frequency.
5. Ballast and weighting values which limit the effect of any one single loss.
Experience modification errors cost business owners money each year if their insurance agent isn’t analyzing the data to insure accuracy. Our workers comp specialists review your experience modification factor at least twice a year and show you how much each mod point is worth. You will also see how claims affect your premium over a 3-year period.
For most employers, workers compensation insurance is all about one number — the premium. –
Understanding the factors that influence the experience modification factor can help you positively influence this figure through proactive risk management strategies. This can lead to improved workplace safety, reduced claims, and lower overall workers compensation costs.