A Worker’s Compensation Experience Modification Rate (Mod) plays a major role in determining the worker’s compensation insurance premium of a business. The Mod is a metric that allows insurers to calculate worker’s compensation premiums by looking at the number of claims or injuries a company has had in the past.
The benchmark average for an Mod is 1.0. If your company’s EMR is less than 1.0, the worker’s compensation premium will be lower than average. An EMR number greater than 1.0 will result in higher premiums.
If your company is performing as expected for its size and shape, you can expect an Mod of 1.0. Simply stated, if your company is not performing well, the Mod will be greater than 1.0, meaning that you’ll have to pay more. Rates lower than 1.0 essentially result in a ‘discount’.
What Does the Mod Mean for Your Company?
At the time of publication, the National Council on Compensation Insurance (NCCI) calculates the EMR rates for companies in 39 out of the 50 states. If your business is located in one of the remaining 11 states, an independent agency will determine the Mod.
It is important to note that the NCCI’s Mod is mandatory, meaning that if your company meets the basic eligibility premium criteria established for your state, the rate calculated by NCCI will apply to your company. That minimum standard cannot be changed by an individual insurance provider.
Because your Mod determines your worker’s compensation premiums, this rate directly affects your company’s bottom line. The higher your risk rate, the more you’ll have to pay for worker’s comp insurance. If your company has experienced a string of accidents, your Mod will be significantly higher than the 1.0 industry average. As a result, you run the risk of having to pay hefty worker’s comp insurance premium payments. This can put your company at an extreme disadvantage compared to your competitors, considering if all other things are equal.
As an example, if your company has an Mod of 1.4 and your competitor has a spotless record, they could have an Mod of .85. This puts your company at a 55% disadvantage. Depending on the industry that you’re in and how large your operations are, this can result in quite the premium difference, which is why it’s important to understand the basics about the Worker’s Compensation Experience Modifier.
At Portal Insurance, we work with companies that have higher than average Mod’s to help get them lowered, to get more information on this please click here.