For many employers, the experience modification factor (or “mod”) is a complex, sometimes misunderstood component of workers’ compensation insurance. Yet, the mod is crucial—it directly impacts their premium costs. As a workers' comp insurance agent, you can bring invaluable expertise by helping clients understand what the experience mod is, why it matters, and how it can be managed to lower their premium costs.
Educating clients on the mod doesn’t just help reduce their expenses; it builds trust, positions you as a strategic partner, and serves as an effective defense against competitors. It’s also an excellent prospecting strategy, as many agents overlook this educational aspect. By filling this gap, you can cast doubt on the client’s current agent and potentially win new business.
Let’s go over how to break down the mod for clients and prospects and help them reduce it, ultimately lowering their work comp premiums.
Begin with the Basics: What is the Experience Mod?
Start with a simple explanation. The experience modification factor is a multiplier applied to a company’s work comp premium, based on its actual claims history compared to what’s expected in the industry. If their experience mod is above 1.0, it indicates a history of higher-than-expected claims, and their premium is increased. If the mod is below 1.0, their claims are lower than expected, and they get a discount.
Explain Why it Matters
Make sure employers understand that the experience mod is directly tied to their premium cost. For instance, if their mod is 1.25, they’re paying 25% more on their premium than companies with a mod of 1.0, while a 0.75 mod would mean they’re paying 25% less.
For clarity, you could explain the mod as if it were a “grade” in school, with 1.0 being average (or a C grade). If their current mod is 0.75, that seems very positive. But if their minimum possible mod is 0.60, they’re not performing as well as they could be. The goal is to help them achieve the lowest mod possible for their industry, so they can maximize savings on work comp premiums.
Conduct a Mod Analysis: Find Opportunities for Improvement
A mod analysis can reveal savings opportunities, making it an invaluable tool to position yourself as a proactive advisor. By reviewing your client’s past claims, you can identify trends and potential improvements that could lead to a lower mod score. Walk them through key areas, including:
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- Claim Frequency and Severity: Frequent small claims can add up. Look for patterns in the types of injuries and the departments where they’re happening most.
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- Lost-Time Claims: Explain that lost-time claims are more costly to the mod than medical-only claims. Help employers identify ways to reduce lost-time by using modified-duty return-to-work programs.
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- Return-to-Work Programs: Show them the benefits of having a solid return-to-work program. The quicker an injured employee returns to work, the lower the claim’s impact on their mod.
For prospects, offer a free mod analysis. Most agents won’t go this far, so this is a great opportunity to add value, show how you can save them money, and demonstrate that their current agent might be leaving savings on the table.
Explain How to Lower the Mod: Effective Claims Management
Once you’ve conducted a mod analysis, outline strategies that can help the employer lower their mod over time. This is often where employers see the true value you’re bringing as an agent. Here are some actionable strategies to review with them:
Safety Programs
Investing in strong safety programs can prevent accidents from happening in the first place. Help clients understand the return on investment for these programs—not only do they reduce injuries (and thus the mod score), but they also boost productivity and morale by keeping employees safe.
Modified Duty and Return-to-Work Programs
In many states, medical-only claims have a 70% discount on the mod compared to lost-time claims. Explain the importance of return-to-work programs and modified duty in minimizing lost-time claims. If the employer can get injured employees back to work quickly in a safe, modified role, these claims can remain medical-only and result in huge savings.
Claims Review Process
Encourage the employer to regularly review and manage claims, especially for severity and proper classification. Claims that are mishandled or misclassified can have a negative impact on the mod. Regular reviews ensure that no incorrect claims data is feeding into their mod calculation.
Address Common Misconceptions About the Mod
Many employers may hold misconceptions about their mod, which you can clarify as part of your educational approach:
Misconception #1: A Mod Below 1.0 is Always ‘Good’
A mod below 1.0 is better than average, but it might not be the best they can achieve. Help them understand that the goal should be to reach their “minimum mod,” which represents the lowest mod score achievable based on their industry, payroll, and other factors. Even with a mod of 0.90, they might be leaving money on the table if their minimum mod is 0.70.
Misconception #2: The Mod is Fixed and Can’t Be Changed
Explain that the mod is dynamic and can change based on proactive risk management practices. Employers often believe the mod is a static number, but with your guidance on claims management and safety programs, they have the ability to impact it over time.
Misconception #3: Premium Costs Are Out of Their Control
Help them see that while industry risks are unavoidable, the mod score is within their control. By implementing safety and claims management practices, they can reduce their mod, giving them more control over their premium costs than they may realize.
Reinforce Your Value: Educating Beyond the Basics
As you walk clients and prospects through the mod, reinforce the value you’re bringing by educating them beyond what they might expect from their incumbent agent. Explain how a well-managed experience mod can lead to significant long-term savings, demonstrating that your expertise is worth more than just a policy placement.
Offer ongoing education through resources such as:
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- Quarterly Mod Reviews: Hold quarterly check-ins to review claims, identify potential adjustments, and monitor progress on lowering the mod.
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- Compliance Updates: Many employers struggle to keep up with compliance requirements related to workers’ comp, so provide updates on any regulatory changes and how they may affect their mod.
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- Safety Training and Claims Management Support: Help implement training programs, toolbox talks, and claims management practices that target injury prevention and mod reduction.
Use Mod Education as a Prospecting Strategy
Educating prospects on the mod isn’t just beneficial for the prospect—it’s a powerful way to cast doubt on their current agent and show how they may be overpaying on their work comp premiums.
Offer to conduct a free mod analysis for prospective clients. Point out gaps where better claims management could have led to significant savings, and discuss potential savings they could realize by partnering with you.
Conclude with a Call to Action
At the end of your discussions, leave clients or prospects with a clear call to action. This could be scheduling a quarterly mod review, implementing a return-to-work program, or reviewing current claims for reclassification. This keeps the focus on next steps and positions you as a hands-on partner who is proactive about helping them save.
Final Thoughts: Empowering Employers with Mod Knowledge
By educating clients and prospects on the experience mod, you deliver a high level of value that many agents overlook. Explaining how the mod works, conducting thorough mod analyses, and helping implement practices that reduce the mod creates a powerful partnership. Not only will you help employers save money, but you’ll also position yourself as a trusted advisor and expert, setting you apart from competitors and building long-term client relationships.
