4 Common Experience Mod Questions

Experience Mod Questions

Table of Contents

The experience mod is a key factor when it comes to worker’s compensation. If you are looking for more information on why an experience mod is important or what exactly it does, we’ll tackle some basic questions here.

Here are 4 basic x-mod questions:

1.   What is a mod?

The mod is also called the experience modification factor, experience mod, x-mod, or eMOD. It is a numerical factor that affects a company’s worker’s compensation premium.

The purpose of a mod is to incentivize safer operations within a company. The mod also protects the financial interests of insurance carriers that offer worker’s compensation coverage. 

Companies that employ relatively safer operations will receive lower mod factors (below 1.0) and enjoy their worker’s comp premium being decreased. This is called a credit x-mod.

Meanwhile, companies that encounter and tolerate higher risks during their operations will be given a mod factor value (above 1.0). This means they need to pay a higher worker’s compensation rate and are paying more than the industry average. An x-mod above 1.0 is a debit mod.

2.   How is the mod calculated?

The mod is calculated by the National Council on Compensation Insurance (NCCI). Depending on the state, it may also be calculated by the state worker’s compensation rating bureau.

The mod is calculated using a mathematical formula that considers the ratio between expected losses in your client’s industry and losses actually incurred by the organization. Actual Losses consist of the amount paid for claims and the frequency of claims. Expected losses consider the company’s payroll (the size of the company) and their class code(s).

The mod is calculated based on a three year rolling average. This means that each workplace incident that occurs, will affect the mod for the three years following.

The additional factor of closed claims also comes into effect. It comes back to exposure of risk. Closed claims means less exposure, having a positive effect on the mod. The faster a claim is closed, the higher the impact and more a company will save. TIP: help implement a return-to-work program and make sure a clear accident investigation program is in place to help close claims.

3.   How does it affect premium?

For example, let’s say that there are two companies, A and B. For simplicity’s sake, both have the same payroll policies and begin with a worker’s comp premium rate of $80 a month.

If Company A in the manufacturing industry frequently sees their employees injured while on the clock at a rate more common and severe than the industry standard, its experience mod might be 2.0.

Meanwhile, Company B in that same industry has implemented very strict safety standards and awareness training. It rarely sees its employees injured on the job and earns an x-mod of 0.5.

Company A’s post-mod rate: 2.0 x $80/month = $160/month

Company B’s post-mod rate: 0.9 x $80/month = $72/month

As you can see, the difference between the two is significant. 

4.   How can I reduce my x-mod?

The mod factor exists to incentivize added safety measures and penalize a lack of adequate safety. Improving workplace safety and implementing precautions to prevent accidents can affect the x-mod.

For more actionable suggestions on how to reduce a company’s x-mod, here are common ways to improve safety: 

  • Help implement a safety program – make sure it stays updated to account for any new incidents or company changes
  • Point out the importance of fostering a workplace environment that encourages safety and pointing out any safety hazards
  • Review the injury reporting plan and make sure it is clearly communicated to your employees  
  • Implement a return-to-work program. Check out more about that, here
  • Implement a Nurse Triage Program: this makes sure injuries are taken care of properly, also lowering losses. 

Businesses – The best way to analyze an experience mod and risk safety program is to perform a mod audit. A mod audit powered by Mod Advisor will show the problem areas and give solutions, like the ones listed above, to improve the mod. Reach out to your agent or partner with us to perform a no obligation experience mod audit. See the impact it will have on your operations.

Agents – At Mod Advisor, we’re here to give you the tools needed to continuously educate and use mod analysis effectively- bringing more value to your agency. We have resources on everything listed above so you can be the work comp professional. Secure a 1:1 demo today or contact us as [email protected] if you would like assistance performing a mod audit.