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What is Workers’ Comp Mod Rate and How Do You Control It?

If you’re a business owner, chances are you’ve heard of the Workers’ Compensation Experience Modification Factor (Mod Factor). But what is it, and how can you control it? In this blog post, we’ll demystify the Workers’ Compensation Mod Factor and provide strategies for keeping your costs down. According to the Institute of Work Comp Professionals, about 75% of all premium audits are incorrect.

What is the Workers’ Compensation Experience Modification Factor?  

The Workers’ Compensation Experience Modification Factor is a number that reflects a company’s past workers’ compensation claims history. Businesses with a high number of claims or high claim costs will have a higher mod factor, which will result in higher premiums. Conversely, businesses with fewer claims or lower claim costs will have a lower mod factor and pay less for their workers’ compensation insurance.

How is the Experience Modification Factor Calculated?  

The Mod Factor is calculated using two things: loss data and payroll data. Loss data includes the total cost of all workers’ compensation claims filed by your employees over a three-year period. Payroll data reflects the amount of money you pay your employees during that same three-year period. The ratio of loss data to payroll data gives insurers an idea of how risky it would be to insure your company.  

How can I keep my Experience Modification Factor low?  

There are several things you can do to keep your company’s Mod Factor low:  

• Offer safety training to your employees and create a culture of safety in your workplace. This will help prevent on-the-job accidents and injuries.  
• Promptly report any accidents or injuries that do occur so that they can be properly documented and investigated.  
• If you do have to file a claim, make sure it is completely accurate and honest. Filing fraudulent claims will only increase your company’s Mod Factor.  
• Work with a reputable workers’ compensation insurance broker who can help you get the best possible rate for your insurance premium.  

The bottom line is that the Workers’ Compensation Experience Modification Factor is a number that reflects your company’s past workers’ compensation claims history. The higher your company’s Mod Factor, the more you will pay for workers’ compensation insurance premiums. If you'd like to discuss your experience modification factor with one of our Risk Advisors, we would be more than happy to have a conversation!

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