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What is an Experience Modifier and how does knowing yours help?

When it comes to Worker’s Compensation polices many business owners only look at one number – the premium quoted. Yet taking a deeper look into how your premium is calculated can provide valuable insights on ways to lower your premium in the future.

Here is a simplified view of how workers’ compensation insurance premium is calculated

Workers’ Class Code Rate X Experience Modifier X (Payroll/$100) = Premium*

Parts of this formula are beyond your control but there are steps you can take to improve your Experience Modifier.

What is an Experience Modifier?

An Experience Modifier (Experience Mod or Mod Factor) adjusts your workers’ compensation premium based on the number and severity of losses to your business compared to what is calculated as average in your industry, location, and size of operation. The Experience Modifier can either be a credit or a debit that is applied to your workers’ compensation premium. If your losses are worse than average (higher than 1.0), a surcharge will be added to your premium, however, if they are better than expected (less than 1.0) this would result in a debited premium.

If you have had workers’ compensation losses in the last 3 years, your insurance agent can use a Mod Analysis to pinpoint what losses are affecting your current Experience Mod and calculate the amount of money you could be saving if your Experience Mod where improved.

How can I improve my Experience Modifier?

By identifying cost drivers, such as frequency and severity of losses, you can develop a specialized loss control solution that is specific to your operations.
Concklin Insurance Agency offers several resources on workers’ compensation loss control solutions and is here to help you get started with:

  • Return to Work Programs
  • Safety Programs
  • Employee Handbooks and Safety Manuals
  • Employee Safety Communications Library
  • Employee Safety Incentive Policies

Contact Concklin Insurance Agency to learn more about Workers’ Compensation and ways we can help you improve your Experience Modifier.

*This is a simplified formula for educational purposes only. The actual calculation can be more complex, subject to state regulations and requirements, and may not apply to every policy. The best way to calculate your Worker’s Compensation Premium is to request a proposal from Concklin Insurance Agency.