What is an Experience Mod Factor?
A Mod factor contributes to how much companies pay each year in workers’ compensation premiums. Simply expressed, the mod is a ratio of actual losses to expected losses over a 3-year period. For example, if a company’s Mod rate is 1.0, they pay the industry’s average rate. However, if the Mod rate is .80, they pay 20 percent less than the industry rate, and conversely, if the MOD rate is 1.2, they pay 20 percent more than the industry rate.
What effect does my Experience Mod have on my bottom line?
Think of the effect an Experience Mod has on your workers’ compensation policies as more of a line of credit, rather than an insurance policy. In many cases, employers will pay back more than the cost of the injuries because of the impact the Experience Mod has on their premium.
When an Experience Mod is analyzed, employers can see:
- The cost of the injuries by employee name
- The number of Modification points attributed to each injury
- The current year increase in premium cost due to that specific injury
- The cumulative increased premium cost over a three-year period, which is how long a claim influences the Mod
Many employers are amazed when they discover that their Mod could be as much as 80 points lower than it is. The gap between costs generated by your current Mod and your best possible Mod is actually a controllable cost.
How can I better manage my Experience Mod Factor?
The most common solution to better manage your Mod factor is by preventing injuries through implementation of safety programs. Employers must also focus on effective hiring practices, implementing return to work programs, proactive claims management, and supervisor training.