What is this Experience Modification Factor?

AKA your mod. To put it simply, it’s your company work comp credit score the state keeps on you.

I know, exciting, right?

Most states, Indiana included, use NCCI national classification is created and managed by the group of member insurance companies. They also create the formula to calculate what your mod.

So, what is the mod and what does it do?

One point to bear in mind, you may not have a mod. If you are a small business owner, and spend less than $2,000 a year in work comp premium, you may not qualify to have a mod calculated by the state.

If you do though, your mod determines the increase or decrease that a work comp insurance carrier assigns to their base rates.

The basic math behind it is a ratio of premium you pay vs the expected amount in claims that insurance carriers expect to pay. There are a variety of variables that go into that, but that’s the nuts and bolts.

So, when you are looking at your mod rating 1 = 0. When the insurance carrier adds your mod rating to the calculation, they literally are multiplying their base rate of (let’s use $2.25 per hundred of payroll as an example) times your mod. So, $2.25 x 1 = $2.25. If your mod is good, let’s say .92, then the math is $2.25 x .92 = $2.07. So, you get an 8% savings on your work comp.

A change in your mod can make some of most significant differences in your work comp costs. Let’s say you are a landscaper, and spend $100,000 a year on payroll for your laborers.

1. That would be $100,000 / 100 = 1,000
2. So, $1,000 x $2.25 = $2,250.

Now, let’s say you have that .92 mod.

1. Now your rate is $1,000 x $2.07 = $2.070.

BUT, if you have a bad accident, have numerous small incidents, or have an injury that drags out due to poor management, and now your mod 1.21

1. $2.25 x 1.21 = $2.72
2. Now, with the new rate of $2.72 x $1,000 = $2,720

It’s takes time and focus to bring your mod down, but your mod can spike overnight with a bad accident!

This is why it is critical to have safety procedures and a well established safety culture in please to prevent injuries and illnesses on the job! And, just as important to have a well trained procedure on what to do after an incident. Poor management can lead to an expensive recovery.