How is experience mod calculated?

By Lawson Shaffer, Producer

Workers’ compensation insurance coverage protects both businesses and their employees from financial loss when an employee is injured on the job or gets sick from a work-related cause. While workers’ compensation coverage is required for some businesses, we recommend that all businesses obtain coverage. However, there is no standard cost for workers’ compensation coverage.

Your cost for workers’ compensation insurance depends on several factors, including state laws, business size, type of work, and your business’s experience mod. 

What is an experience mod?

“Mod” is simply short for modification or modifier. An experience modification rate is what insurers use to adjust a business’s insurance premium. It gauges past claims and cost of injuries, plus your future likelihood of risk. The lower your experience modification rate, the lower your insurance premium. 

How is an experience modification rate calculated?

To calculate a company’s experience mod, the National Council on Compensation Insurance developed a complicated formula that analyzes the ratio between the expected losses in your industry and the losses your company actually incurred, as well as the frequency and severity of those loses. The result of that formula is your experience mod, which is then multiplied against a premium rate to determine your insurance premium.  

How does your experience mod impact your insurance premium? 

While experience mod takes a business’s payroll and job classification into account, claims are king when it comes to calculating experience mod. They are the varying and deciding factor. The more claims your business files, the higher your experience mod will be. 

A 1.0 or below experience mod is ideal. For example, if your mod is 1.1, then you’re paying 10 percent more than the average market price. On the other hand, if your mod is below 1.0, you’re paying below the average market price. To minimize the cost of your insurance premium, it is important to keep your claims and experience mod low. Fortunately, there are ways to lower your experience mod. 

Improve your experience modification rate with Byars|Wright in Birmingham, AL

At Byars|Wright, we proactively protect our clients’ experience mods through several practices and recommendations. First and foremost, we recommend establishing a safety program. Safety programs are key to improving experience mods. These programs are crucial in teaching employees proper behavior and techniques to help minimize problems. Additionally, we often recommend that a business has an in-house claims team or department that focuses on mitigating risks and injuries. 

At Byars|Wright, we have an in-house claims team devoted to improving your experience mod and handling every claim our clients have. Plus, we have an in-house safety training consultant who works with clients to inform them of the ins and outs of safety protocols. 

All in all, we will work with you to ensure you are managing your risks and minimizing claims. Contact us today to learn more about lowering your premium and improving your experience mod! 

Byars|Wright is a locally owned and operated independent insurance agency with five offices in the greater Birmingham area – including Jasper, Gardendale, Homewood, Alabaster, and Cullman – that has developed into a major provider of commercial and personal insurance. Since 1946, the agency has expanded its scope of business and delivers a wide-range of insurance products with quality coverage at competitive prices. Byars|Wright has been designated a Best Practices Agency by the Independent Insurance Agents and Brokers of America and was also named “Best Companies to Work For in Alabama” by Business Alabama in 2016, 2017, 2018. 2019. We Build People, Protect Relationships. Byars|Wright is Where Relationships Matter.