First things first, has your business ever heard of a workers’ compensation experience modification factor? We’ll refer to this as your “workers’ compensation mod” for short, but if you don’t already know what it is, it’s incredibly important to your business or commercial insurance policy. It’s important to both understand and monitor your workers’ compensation mod, because it directly affects how much you will have to pay on your commercial insurance or workers’ compensation premiums. With that being said, we aim to help our commercial clients in whatever way we can, including saving money. Let’s get started!
What is a workers’ compensation mod?
Basically, a workers’ compensation mod is a number assigned to your business that compares the number of claims your business experiences to other businesses that are similar in operation size to yours. At the end of the day, it determines how much risk is involved with providing your business coverage. Additionally, it’s a way that insurance companies and carriers can figure out how much your insurance should cost based on the characteristics of your business.
How is it calculated?
The actual process of calculating your business’ workers’ compensation mod is very complex, even though the purpose of this complex formula is pretty straight forward. The first thing the formula looks at is your company’s actual losses compared to its expected losses, based on the industry type. After that, they factor in a few more variables, such as your company size, unexpected large losses, and the difference between loss frequency and loss severity. At the end of the day, your experience mod is calculated by the National Council on Compensation Insurance (NCCI). Experience ratings are mandatory and apply to all employers that meet the state’s premium eligibility criteria, so at the end of the day, you don’t have to worry about the fine details on how it is calculated. Just know that your mod is essentially assigned to your business and that it determines how much your premium will cost.
When it comes to calculating your insurance or workers’ compensation premium, your workers’ comp mod represents a credit or debit that is applied to your compensation premium. A mod of 1.0 is considered to be average, while a mod factor of more than 1.0 is considered to be a debit – this means your losses are worse than they were expected to be, and your insurance premium can go up. If you have a mod that is under 1.0, that would be considered a credit mod, where you can get discounted on your insurance premium. So how do we keep our workers’ compensation mods low so that we have an affordable premium?
Keeping your Workers’ Compensation Mod Down
Of course, once a savvy business owner hears about a workers’ compensation mod, they immediately ask us this question – “How can I keep my mod down?” Yes, as your trusted providers in everything insurance, we want to help you keep your mod down as well, and your insurance premium at an affordable low. Here’s what you can do:
- Contact NCCI to ensure that your workers’ compensation mod is accurate. You don’t want to be paying more (or less) if your mod is inaccurate due to incorrect or incomplete data.
- Remember that your workers’ compensation mod is influenced heavily by frequent losses. The fewer losses your business experiences, the better.
- Create a safety program in your business that is proactive on injury prevention in the workplace – this should help keep your number of claims down so your mod doesn’t increase.
- Create or improve an effective return to work program to get injured employees back to the workplace as soon as it’s medically feasible.
- Report any injuries as soon as they happen – the longer it takes to report, the lower the cost of the claim, based on our experiences with our clients.
- Train your front line managers or supervisors on how to handle injuries in the workplace. Additionally, if you take the time to review the guidelines of your safety program with these individuals, it will help with enforcing it to the rest of your staff.
In Conclusion
We hate to be the bearers of bad news when one of our commercial clients has a rate increase on their premium. We hope that the more you know about your workers’ compensation mod, you’ll take proactive steps to keep your insurance premium down. Remember, if you ever have any questions on your commercial insurance policy with our agency, or you’d like to get a quote to see how our agency can help you, contact us today!
