Experience mods, or experience modifiers, are a factor used by insurance companies to adjust the premiums for a business’s workers’ compensation insurance policy. These modifiers are calculated using data from the business’s claims history, industry averages, and other factors, and they are used to determine the likelihood of the business filing a workers’ compensation claim in the future.
For businesses with a good claims history, an experience mod can result in lower premiums for their workers’ compensation insurance. On the other hand, businesses with a higher number of claims or more severe claims may see an increase in their premiums due to a higher experience mod.
Experience mods are typically expressed as a decimal number, and they can range from 0.5 (indicating a lower risk of claims) to 1.5 or higher (indicating a higher risk of claims). An example would be if your experience mod is a 1.5 you are paying 50% more than your peers for your workers compensation policy! That means a contractor or manufacturer, whichever it may be, that has a mod of 1.0 is paying 50% lower than you! Insurance companies use a variety of factors to determine a business’s experience mod, including:
- The number of claims filed by the business (a large amount of small claims will effect your mod worse than 1 very large claim, many occurrences is bad for you mod!)
- The severity of those claims (measured by the amount of money paid out)
- The business’s size and industry
- The business’s safety record
- The business’s loss prevention efforts (carriers will often give credits if you have good loss prevention efforts in place, this is something that we do for every policy, create a comprehensive loss prevention plan for your business)
Experience mods are calculated using a formula that takes into account the above factors, as well as industry averages and other data. This formula is typically applied to a business’s claims data from the past three years and an experience mod worksheet is created, although some insurance companies may use a longer time frame.
As a business owner, it’s important to understand your experience mod and how it can impact your workers’ compensation premiums. If your experience mod is higher than you would like, there are several steps you can take to try to lower it:
- Implement safety measures: By taking steps to prevent accidents and injuries on the job, you can reduce the likelihood of filing a workers’ compensation claim. This can include providing proper training and equipment, conducting regular safety inspections, and implementing safety protocols.
- Invest in injury prevention programs: Some insurance companies offer injury prevention programs that can help you identify and address potential safety hazards on the job. By participating in these programs, you may be able to reduce your experience mod and lower your premiums.
- Review and correct any errors: If you find errors in your company’s claims history, it’s important to address them as soon as possible. This can help ensure that your experience mod is accurate and that you are not paying higher premiums due to errors.
- Shop around for insurance: It’s always a good idea to shop around for insurance and compare quotes from multiple providers. This can help you find the best coverage at the most affordable price. This is also an important aspect in why you need an independent agent that can not only shop your workers comp policies, but finding one that also is knowledgeable in workers comp and more specifically one that knows your industry.
By understanding your experience mod and taking steps to improve it, you can potentially lower your workers’ compensation premiums and protect your business in case of an on-the-job injury. It’s an important investment that can help safeguard your business, so it’s worth taking the time to understand and manage your experience mod.
