What Is an Experience Modification Rate?


Experience Modification Rate / Wednesday, February 3rd, 2021

An experience modification rate is a calculation insurance companies use to manage workers’ compensation costs. It assesses past claims of this type and determines the potential for additional lawsuits.

How Experience Ratings Work

Insurance carriers use the metric: actual claims/expected claims to compare your workers’ compensation claims to other businesses within your industry. The industry average is an experience mod of 1.0. A number below this results in lower premiums. A figure higher than the average increases your payment amount.

Why Managing Your Claims Is Important

You must understand and handle your workers’ comp claims effectively. Efficient management is key to minimizing your costs. Expenses include damages paid, defense of claims and money reserved for possible future lawsuits. The types of cases brought against you and how you control the costs significantly affect your experience modification rate.

What You Can Do To Lower Your Rating

Create an effective safety program for your business to eliminate hazards and prevent workers’ injuries. Adequately train all members of your staff on safety protocols. Maintain regular updates and reminders regarding proper practices and dangers in the workplace. Accidents may still happen, but you can keep your rating low by responsibly managing claims.

Insurance carriers use an experience modification formula to judge a company’s management of workers’ comp claims and dedication to maintaining a safe work environment. Taking the time to address possible dangers and promptly handle lawsuits can save you money with lower monthly premiums.