Highlighting News, Trends and Best Practices in Risk Management and Property & Casualty Insurance

How is Your Company’s Experience Modification Impacting Your Workers' Compensation Insurance Costs?

Posted by Ironwood Property & Casualty Insurance Brokerage on Sep 25, 2018 1:15:00 PM

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Emphasizing employee safety in the workplace not only protects employees, but also a company’s bottom line.  Workers’ Compensation claims can be extremely costly and drawn out depending on the type of injuries and litigations surrounding them.  Additionally, and often unnoticed, a company’s experience modification factor or “mod” can also create major cost implications.

What is an experience mod and what factors are considered?

An experience modis a calculated score based on data collected from the National Council on Compensation Insurance (NCCI).  A mod’s calculation takes into account a company’s past Workers’ Compensation claims history and compares it to the industry norms from similarly sized businesses.  On average, a period of 3 years’ history is taken into consideration.  Experience mod scores impact a company’s premium as either a debit or a credit to the premium costs, with an ideal score being <1.0.

How can companies keep their mod as low as possible?

Just like most aspects of insurance, having a well thought out plan that mitigates risks through preventive procedures and immediate action, is key.  At Ironwood, we pride ourselves on creating plans that are unique to each one of our clients in order to drive down their experience mod as much as possible. 

Employers should ensure that employees are well trained, reducing the risk for Workers’ Compensation claims.  Rewarding good safety behavior and disciplining those who refuse to follow safety guidelines are a few way companies can actively decrease number of claims in a policy period. 

Most importantly, each incident should be reported immediately.  Failing to report an incident or not doing so in a timely fashion can have detrimental effects to an experience mod.  It is important to have claims reported and settled as soon as possible.

How can companies ensure that they are being evaluated correctly?

At Ironwood, we understand the impact that experience mod has on a policy’s premium which is why we devote extra time to it as part of our comprehensive due diligence process.  Our industry experts know how important it is to review your company’s prior history and ensure that there are no errors or mistakes that result in an incorrect mod calculation. 

We find that many times clients have paid higher premiums for long periods of time due to errors with their experience mod.  Ironwood’s clients benefit by working with us since we make it common practice to review a company’s experience mod each year, rather than every 3 years.  Annual review is important because changes in payroll, company size, number of locations, mergers and acquisitions, or even the number of unsettled claims can affect your experience mod---and your bottom line. 

To find out more about your company’s experience mod or to see if it is being calculated correctly, please contact Ironwood today.

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