For many employers, workers’ compensation insurance is all about one number—the premium quoted. Understandably, employers want to pay the lowest amount possible on this mandatory coverage. While some brokers try to compete on a low bid, those who do miss the chance to educate employers on how their mod affects their premium, and how lowering their mod through targeted improvements in safety, hiring, return to work and other areas will ultimately improve both their direct and indirect workers’ compensation costs.
There’s much more to workers’ compensation than price. Let us show you how an analysis of your mod can identify problem areas in your operations and ultimately lead to cost savings.
What does your mod reveal?
While the mod itself is a single number, an analysis of how your payroll and loss data functions in the experience rating formula can provide valuable insight.
Mod calculation varies by state but generally depends on these components:
- Actual losses from the three prior policy periods, not including the most recent policy period
- Expected losses based on payroll and expected loss rates for the industry
- The amount of each loss, i.e., its severity
- Whether the loss is medical-only, without temporary or permanent disability
- Ballast and weighting values published by the National Council on Compensation Insurance (NCCI)
Generally, the mod is calculated using loss and payroll data from a three-year experience rating period. For example, for a mod factor calculated on Jan. 1, 2015, data would be used for the Jan. 1, 2011-2012, Jan. 1, 2012-2013 and Jan. 1, 2013-2014 policy periods. The data for the previous year (in this case, Jan. 1, 2014-2015) would be excluded.
Most employers realize their mod affects premiums in some way, but they rarely connect the dots and realize what actions they can take to lower their mod and insurance costs. That’s where we come in. We can introduce cost-cutting concepts you may have never heard before and put workers’ compensation insurance in a new light.