Many companies focus on reducing their insurance premiums by negotiating with brokers or shopping policies between carriers. While these steps can sometimes produce short-term savings, they often overlook the biggest driver of workers’ compensation costs: the company’s Experience Modification Rate (MOD).
A high MOD rate can quietly increase insurance premiums year after year.
Because the MOD rate directly affects how insurance carriers price risk, even a small increase can translate into tens or hundreds of thousands of dollars in additional costs over time.
Consider a simple example.
A company with a workers’ compensation premium of $200,000 and a MOD rate of 1.30 may be paying approximately $60,000 more per year than a similar company with a MOD rate of 1.00. Over five years, that difference could exceed $300,000 in additional insurance expenses.
What causes a MOD rate to rise?
In many cases, it’s not just major accidents. A pattern of smaller claims, delayed reporting, poor return-to-work practices, or inconsistent safety procedures can gradually increase the rating factor.
The challenge is that many businesses don’t notice these patterns until their insurance renewal arrives and premiums increase.
Reducing a high MOD rate requires addressing the operational factors that drive claims. Companies that invest in proactive safety programs, improve incident documentation, and manage claims more effectively can often bring their MOD rate back down over time.
The earlier these improvements begin, the faster the financial impact can be realized.
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