Skip to main content

What Does Your Experience Modification Say?

By June 12, 2015August 22nd, 2018

What does your experience mod say about your company? The analysis of how your payroll and loss information function within the mod can provide valuable insight. The mod factor represents either a credit or debit that is applied to your premium. An average mod is 1.0.

A mod factor greater than 1.0 is a debit mod, which means that your losses are worse than expected 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 thousands of dollars each year. Ensuring your factor has been correctly calculated is your first priority. Next you should examine the loss trends to target your safety efforts in the most impactful areas. Then understand how much each mod point is worth and how claims affect your premium over a 3 year period.

For many employers, Workers’ Compensation insurance is all about one number — the premium quoted. Understandably, business owners want to pay the lowest amount possible on this mandatory coverage but a key to understanding your Workers’ Compensation premium is understanding the experience modification factor.

If you think you may be overpaying on your Workers’ Compensation because of experience modification errors, call The Flanders Group at 800-462-6435 and find out for sure.