3 Ways to Improve Your Experience Mod
An experience modification factor, or “mod” for short, is one of the largest influencers on workers’ compensation premium for any company. Developed either by the National Council on Compensation Insurance (NCCI), or individual state rating bureaus, your experience mod represents your company’s workers’ compensation claim experience in relation to other peers in your industry. If your mod is less than 1.0, you’ll receive a discount to your premium; if it’s higher than 1.0, your premium goes up accordingly.
So how does a company improve their experience rating factor? Here are three general ways to save on premium and improve your risk:
1. Focus on loss prevention. The way in which experience modification factors are calculated the frequency of claims has a much larger impact than severity. A worksite with multiple workers’ compensation claims statistically reflects a more hazardous environment than a jobsite with one large loss. A bad injury can happen anywhere and isn’t necessarily a predictor of a high-risk worksite. However, a large number of claims reflect a worksite where things may not be as controlled as they should be.
For staffing firms, here are a few areas where you can focus on preventative risk management:
- Fully evaluate all jobsites prior to signing on with a new client
- Develop a robust employee screening process
- Request and review your clients’ workers’ comp loss history, and be prepared to walk away from the wrong risk; this will pay future dividends to your bottom line
- Investigate accidents and identify ways to prevent similar future losses
2. Get your employees back to work. While this can be easier said than done, I can’t stress enough the importance of having a return to work program in place. Medical only claims, or claims that don’t include indemnity lost wage payments, are discounted by a full 70% on your experience modification calculations. For example, if you have a $10,000 claim that’s medical only, only $3,000 of that claim will go into your rating calculation. After an employee injury, having a return to work program that can get your employee back to work with light duties will allow you to realize this benefit. It can also have the added effect of providing further motivation to your employee to focus on their recovery, so they can get back to their normal job.
To badly paraphrase Newton’s First Law of Motion, “An object in motion stays in motion. An object on the couch stays on the couch.” Get those employees back to work!
3. Start now. Your mod calculation is comprised of the past three complete policy terms. When your mod factor is calculated prior to your renewal, your current policy term claim data isn’t included. Instead, the calculation reflects the three prior years. Unfortunately, this means difficult loss years may haunt your premium for some time. While it may take time to see the benefits of your efforts, the sooner you start addressing your high-risk areas the better. Remember, safety is never adequately utilized as a short-term solution.
At Assurance, our brokers and safety consultants work with companies nationwide to improve their risk profile and reduce total cost of risk. Contact us for assistance today.
- Workers’ Compensation E-Book
- Workers’ Compensation Videos
- How to Calculate Your Experience Mod
- Top 10 Ways to Control Your MOD Factor
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