Impact on Your Business and Rates

Many business owners are unclear about the impact of experience mod factors on their insurance premiums. Think of experience mod factors as a type of safety score that can significantly influence your insurance rates and costs. Let’s review how the score is determined, and what you can do to positively influence your score.

The experience mod factor calculation is quite simple. Take your Actual Losses and divide them by the Expected Losses in your industry (for companies of your size), and the result of that calculation is equal to your Experience Mod Factor (also known as experience modification factor or just experience mod). Employers that have an experience mod factor equal to 1.0, are precisely average in claims cost loss compared to businesses of comparable size within their respective industry. If the employer has a factor below 1.0, their claims are lower than expected, whereas a score above 1.0 means their claims experience is higher than expected, An experience mod higher than 1.0 can result in higher workers’ compensation rates.

Experience mods are often calculated by each state’s rating bureau, not by insurance carriers. Rating bureaus calculate employers’ experience mod every year, about 90 days prior to policy renewal dates. The rates are then submitted to the carriers which use the experience mod factor to help calculate the employer’s workers’ compensation premium.

Injury claims are a key component in determining experience mod factors. If the goal of your company is to have a factor of .7, you need to have a superior safety program in place to prevent workplace injuries, and a history of low claims and costs. A score of .7 can result in significant premium savings over a score of 1.3 for example.

Many companies are unsure how they can reduce their experience mod factor, and don’t understand how they can implement a comprehensive and effective loss control and safety program. These types of programs can not only reduce insurance costs, but they can also reduce absenteeism, and improve morale and productivity.

Looking for help to reduce your experience mod factors, or to establish refine or enhance your loss control and safety program? Reach out to the Windermere team for a no obligation consultation!