Feb
9
2018

In most states, workers’ compensation (WC) insurance is mandatory for employers, which is why it’s important to understand the factors affecting your premium and how to reduce costs. Your practice’s experience modification factor (also known as a mod) plays a key role in determining the WC premium for your business.

How is a mod calculated?

The process of calculating your practice’s mod is complex, but the underlying theory and purpose of the formula is straightforward. Your company’s actual losses are compared to its expected losses by industry type. The formula incorporates factors like company size and the value of losses, as well as loss frequency and loss severity, to achieve a balance between fairness and accountability. While large losses will affect your mod, the total number of losses over time is a more significant indicator of risk and plays a larger role when your mod is determined.

How does my mod affect my premiums?

The mod factor represents either a credit or debit that is applied to your WC premium. A mod factor greater than 1.0 is a debit mod, which means that your losses are worse than expected and a surcharge will be added to your premium. A mod factor less than 1.0 is a credit mod, which means losses are better than expected, resulting in a discounted premium.

How can you save money?

Reduce your mod! Establishing a proactive safety program is an effective way to reduce losses, positively impacting your mod and WC premium.

Do you know where your practice stands? Call 866-380-AAHA (2242) or email aaha@hubinternational.com for more information today!

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