Understanding Experience Modification Factoron January 18th, 2013
There are some businesses that may not have to worry as much about having good workers compensation coverage if the work environment isn’t that dangerous, but working in an auto repair shop isn’t one of those businesses. There are a variety of factors that impact how much auto repair shop owners will pay for workers compensation. Shop owners will do well to learn what the experience modification factor is and how it can determine how much they pay for insurance.
Experience modification, also known as either experience mod or mod, is a way for insurance companies to give higher rates to auto shops with weak loss experience and lower rates to shops with satisfactory loss experience. For instance, a shop that that has had several losses could have a mod of 1.25. The insurance company would then increase their workers compensation policy by 25%. An auto repair shop with fewer workers compensation losses could see their mod drop as low as .60, which would then earn them a 20% reduction in their compensation policy. The experience modification factor is calculated from past experience, some states looking as far back as three years.
Shop owners should make sure that they have adequate safety precautions in place in order to reduce accidents. Self-inspection, accident programs, drug testing and proper training for employees are also good methods to have in place in order to reduce experience mod and keep a workplace safe.
Communicate with employees the importance of having a safe work environment in order to help control the price of workers compensation coverage.