Your MOD rate for your workers compensation is definitely something that can have a major impact on your bottom line profits. Your MOD rate stands for modification rate or essentially your experience modification rate. Every business starts with a 1.0 mode rate. Which means if you pay $10k per year in premium, you would multiply that rate by your 1.0 mod rate and $10k would be your yearly amount. But depending on how your experience goes, your mod rate may go up or down. If you have a lot of claims/injuries, your mod rate will go up and could stay up for 3 years. If you have no claims/injuries your mod rate goes down and you save money. I’ve seen mod rates as high as 3.05 and as low as .63. But let’s use the $10k example again and use the mod rate of 3.05. Instead of paying 10k a year, you are now paying $30.5k per year. That takes away from your bottom line profit. You have to sell a lot of your product to net an additional $20.5k, which is the difference in premium from a 1.0 mod to a 3.05 mod. Conversely, that same $10k, with a mod rate of .63. You are now paying $6.3k per year. You can see, it can add up quickly in either a positive or negative direction.
What can you do to help lower your mod rate or maintain a mod rate you’re happy with?
Your workers compensation modification rate is an important component of your business and should be managed and regularly checked. Not all injuries can be prevented but if you let your workers know you are conscious about their safety and make a concerted effort to provide a safe environment, day by day improvements can be made.
Written by Glen Drouin, founder and owner of Harbor HR, LLC. Glen has 13 years experience working with his Father’s business and 20 years experience as an HR and business consultant. You can reach Glen at 916-293-2116 or e-mail at firstname.lastname@example.org .