When it comes to managing a business, so much of your success depends on the numbers you track. From profit margins to performance metrics, every figure tells a story about your business. But there’s one critical number many business owners overlook, and it directly impacts your workers’ compensation insurance costs. It’s called the Experience Modification Rate (EMR or MOD), and it’s more powerful than you think. Whether you’re striving to save more, strengthen workplace safety, or gain a competitive edge, understanding your EMR is a game-changer.
This blog will break it down for you, covering what the Experience Modification Rate is, why it matters, and how it directly affects your bottom line. We’ll also walk you through actionable steps to gain control over your MOD and make it work in your favor.
What Is the Experience Modification Rate
Think of your Experience Modification Rate as your company’s safety report card. It’s a number calculated to reflect your workers’ compensation claims history compared to similar businesses in your industry. This rating directly influences your workers’ compensation insurance premiums.
A MOD of 1.0 is considered the baseline for your industry. If your MOD is higher than 1.0 (e.g., 1.25), it means you're paying 25% more than the average business in your field. If it’s lower (e.g., 0.85), you’re paying 15% less. This single number represents more than just cost savings or losses; it’s a direct reflection of your company’s workplace safety standards and proactive claims management.
The Formula in Simple Terms
Your actual claims history + expectations for businesses in your industry = your MOD rating. It’s your performance versus the industry standard, boiled down into one number.
Why Your Numbers Matter
When it comes to your MOD, three numbers have the biggest impact:
1. Your Actual MOD
This is your current number, the one that tells you how your claims history stacks up against the industry average. For example, if your MOD is 1.25, you're paying an additional 25% on workers’ compensation premiums. On the other hand, a MOD of 0.90 means you’re saving 10% compared to the average.
2. Your Minimum MOD
This is the best-case scenario, essentially the lowest MOD your business could achieve if you had zero claims during the rating period. Keep in mind, due to statistical models and unavoidable factors, no company can have an MOD of 0.00.
3. Your Controllable MOD
Here’s the number to watch. Your controllable MOD is the difference between your actual MOD and your minimum MOD. It represents the part of your insurance costs that you can directly influence through proactive strategies.
Why It Matters
The difference between these numbers translates to dollars saved or spent. Picture this:
- A company with an actual MOD of 0.90 pays $90,000 annually for workers’ compensation insurance.
- If their minimum MOD is 0.70, they could theoretically reduce that cost to $70,000.
- That’s $20,000 of controllable costs that could go back into their business every year if they focused on proactive safety measures.
The Factors That Shape Your MOD
Several elements influence how your MOD is determined, and understanding these factors can help you take control.
Payroll Size and Employee Classification
Your workforce’s job roles and the size of your payroll affect your expected losses. Higher-risk jobs or improper employee classifications often inflate your MOD.
Claims Frequency vs. Claims Severity
While it seems logical to assume one large claim might hurt your MOD most, it’s the frequency of claims that carries more weight. Multiple small claims signal recurring safety issues, which negatively impact your MOD more than a one-off event.
Medical-Only vs. Lost-Time Claims
Some states discount the impact of medical-only claims when reported promptly. Lost-time claims, however, carry a heavier weight and can substantially increase your MOD.
Reporting Timeframes
Timely reporting of injuries isn’t just good practice for employee well-being; it’s crucial for keeping your MOD in check. Delays often result in increased costs per claim.
Why Taking Control of Your MOD Matters
Lowering your MOD is about more than cost savings. A proactive approach demonstrates to your employees, clients, and partners that you prioritize safety, efficiency, and accountability. It’s a step toward fostering a healthier, safer workplace, which, in turn, improves morale and productivity.
Practical Strategies to Reduce Your MOD
Here’s how you can get started:
1. Implement a Workplace Safety Program
Tailor your safety initiatives to focus on the specific risks in your industry. Regular safety training and preventive measures can significantly reduce workplace injuries.
2. File Claims Promptly
Efficient handling of claims isn’t just paperwork; it’s a key factor in minimizing costs. By reporting injuries immediately, you reduce delays in care and keep claims costs lower.
3. Develop a Return-to-Work Program
Help employees transition back to work with light-duty tasks, reducing lost-time claims and demonstrating care for their well-being.
4. Audit Employee Classifications
Ensure all employees are correctly classified to avoid overpaying premiums. Partnering with a risk adviser can help identify and address errors.
5. Work with an Experienced Risk Adviser
An insurance or risk management professional can guide you, helping to identify potential issues and opportunities for cost reduction. Their expertise ensures you don’t leave money on the table.
Making Your Numbers Work for You
At Winter-Dent, we specialize in helping businesses understand their Experience Modification Rates and uncover hidden savings. Through our Humans Helping Humans philosophy, we not only provide risk management insights but also partner with you to improve workplace safety and claims processes.
Our employee-owned structure means every team member is personally invested in your success. Whether it’s through a casual coffee chat or an in-depth analysis, our goal is simple—to help your business thrive.
Take Action Today
If you don’t know your numbers, now is the perfect time to discover them. Contact Winter-Dent to analyze your MOD, identify potential savings, and create a strategy to reduce your premiums. Together, we'll keep your costs low and your workplace safe.
Don’t wait to take control. Start making your numbers work for you. Contact us today!
