Finding the best value for your business insurance needs helps control your bottom line.
With workers’ compensation insurance, premiums sometime seem like a complicated math equation. If you’ve shopped for workers compensation premium before, you may have wondered, “What is a mod rating”?
Several factors go into a multiplier called an experience modification rating or “mod rating” for short. Understanding how it affects your rates can help you save money on your workers compensation premiums.
When the insurance company quotes your workers compensation premium, they are comparing your company’s workers compensation experience to other companies that are in your same industry. This information is compiled into what is called your mod rating.
While each insurer uses a slightly different method all insurers are evaluating the same core factors. They look at your company’s size, number of losses you’ve had, the frequency of losses, and the severity of losses.
Your mod rating is designed to indicate whether your company’s workers compensation losses are better than expected or worse than expected. If your experience is better than other companies in your same industry, your mod rating will be < 1.0. If you’ve experienced more claims than similar businesses, your mod rating will be > 1.0.
How does my mod affect my premium?
The formula for calculating your workers’ compensation premium is:
Rate x Payroll x Modification Rating
For instance, if your mod rating is 0.95 you will receive a 5% discount on your premium for that year. If your mod rating is 1.05, then you will be charged an additional 5% on your workers compensation premium.
How can you control your mod?
There are several ways you can make sure you are getting the best mod rate:
Review existing claims – review claims being used to determine your mod rate are active. There may be old claims that are still showing a reserve amount that are affecting your rates. Have the insurance company close these claims.
Leverage premium credits – make sure you are getting the premium credits you qualify for. Many companies will offer discounts for things like safety programs drug/alcohol awareness, and managed health care.
Implement a safety program – this is one of the best ways to prevent injuries and save money on your premium at the same time.
Understanding your mod rating and working with your independent agent to make sure you are given credit for all the discounts you qualify for is the best way to control your workers compensation costs.
Robert Macoviak is the President of Oyer, Macoviak and Associates. Oyer, Macoviak and Associates is the oldest independent insurance agency in Boynton Beach and has been in business since 1953. Oyer, Macoviak and Associates are vested members of the community who are committed to doing business face-to-face and being your insurance advocate in times of need.