Workers’ compensation insurance is designed to protect your employees in case of work-related injuries or illnesses. But did you know that your company’s claims history can directly affect the cost of your premiums? This is where the experience rating modification comes in.
What is an Experience Rating Modification?
Your experience rating modification, often called an “experience mod” or “mod,” is a factor that adjusts your workers’ compensation premium based on your company’s past claims experience.
- Starting Point: Most businesses begin with a mod of 1.0.
- Impact of Claims: If your company has a history of frequent or costly workers’ compensation claims, your mod will likely be higher than 1.0.
- Impact of Good Safety Record: Conversely, if your company has a strong safety record with few claims, your mod will likely be lower than 1.0.
How Does the Experience Mod Affect Your Premium?
- Higher Mod = Higher Premium: A mod above 1.0 indicates a higher risk, and your insurance premiums will be increased.
- Lower Mod = Lower Premium: A mod below 1.0 indicates a lower risk, and your insurance premiums will be reduced.
Who Determines the Experience Mod?
In most states, including New Jersey, the experience mod is calculated by a rating bureau. This bureau collects and analyzes workers’ compensation data to determine a company’s risk profile.
Why Is This Important?
- Cost Control: Understanding how your claims history impacts your mod can help you control your workers’ compensation costs.
- Safety Incentives: The experience mod provides a financial incentive for businesses to prioritize workplace safety and reduce accidents.
What You Can Do
- You may implement and enforce robust safety programs to prevent workplace injuries.
- If an injury does occur, manage the claim promptly and efficiently to minimize costs.
- Understand and review your experience mod and how it’s calculated.
Conclusion
Your experience rating modification is a crucial factor in determining your workers’ compensation premiums. By prioritizing workplace safety and effectively managing claims, you can potentially lower your mod and reduce your insurance costs.