When factoring in your company’s workers’ compensation insurance, it’s important to know what your experience modification factor (mod) is.
What is the Experience Modification Factor?
An experience mod is used to price workers’ compensation insurance premiums. It is essentially the company’s safety score. It’s the ratio of the costs of a company’s actual workers’ compensation claims compared to the expected costs for companies of similar size in the same industry. Fewer injuries equal lower mods and more injuries equal higher mods.
How does it work and how is it calculated?
Injury costs and claims history affect the company’s experience mod as well as future risks. Most states use the National Council on Compensation Insurance (NCCI) to calculate their experience mod, or their state has an independent workers’ comp bureau. Calculating the experience mod factor is a complex process that includes factors related to company industry, size, unexpectedly large losses, loss frequency, and loss severity.
The ratings
An experience mod of 1.0 is considered average for your industry. If it’s under 1.0, then it’s considered good and a safer work environment. If it’s above 1.0, then it’s considered risky. These scores represent a credit or debit that is applied to the company’s workers’ comp premium.
An experience mod greater than 1.0 is a debit mod, which means a surcharge will be added to your workers’ comp premium. An experience mod lesser than 1.0 is a credit mod, which results in a discounted premium.
How to reduce your experience mod
There is always room for improvement when it comes to workplace safety and hiring a risk management team can help you through that process. There are also a few ways to reduce your experience mod to get a better rate on the insurance premiums:
- Accident prevention
- Review loss and payroll data
- Safety programs and detailed work manuals
- Build a culture of safety
- Return-to-work programs
- Frequent communication with employees regarding job site safety
- Effective and diligent training
- Accident investigation programs to manage claim history
While ensuring a safe work environment for everyone is the priority, it’s also important to control costs.
Manage your experience modification factor with Biscayne Risk & Insurance Group
It’s essential to know exactly how workers’ compensation insurance works in order to control your bottom line. Establishing a proactive safety program is a very effective way to reduce costs when it comes to experience modification factors as well as ensuring a safe and healthy work environment. At Biscayne Risk & Insurance, our goal is to help you manage your business’s risks associated with your operations. We have extensive experience in risk management paired with tailored solutions. Contact us today to learn more about reducing your experience modification factor.