The Experience Modification Factor (MOD) is a critical component of workers’ compensation insurance premiums for businesses in New York. Calculated by the New York Compensation Insurance Rating Board (NYCIRB), this factor directly impacts how much a business pays for its workers’ compensation insurance, based on its loss experience compared to industry averages. A higher MOD indicates a higher risk of claims, resulting in increased premiums, while a lower MOD reflects better-than-average claims performance, leading to savings.
How the Experience Modification Factor Works
The NYCIRB determines the MOD by analyzing a company’s actual loss experience (claims) compared to the expected losses for businesses of similar size and industry.
• Payroll: This reflects the size of the workforce and is classified into specific job roles, each with its own risk rating.
• Claims History: Both frequency and severity of past claims are considered, with a greater weight given to frequent small claims over occasional large claims.
• Expected Losses: Calculated based on industry averages for the classification of the business.
The MOD is then expressed as a multiplier, with 1.0 being the industry average:
• A MOD of 1.0 means the business pays the industry average for workers’ comp premiums.
• A MOD above 1.0 increases premiums, while a MOD below 1.0 reduces them.
Four Examples of MOD Calculations
Example 1: MOD = 1.75
A construction company with frequent workplace injuries has a high MOD.
• Payroll: $1,000,000
• Expected Losses: $30,000
• Actual Losses: $52,500
• Impact: This company pays 75% more than the average premium for its classification due to its poor safety record.
Example 2: MOD = 1.20
A manufacturing business with occasional claims.
• Payroll: $1,000,000
• Expected Losses: $20,000
• Actual Losses: $24,000
• Impact: This business pays 20% more than average, reflecting slightly higher-than-expected losses.
Example 3: MOD = 1.0
A retail business with no significant claims history.
• Payroll: $1,000,000
• Expected Losses: $15,000
• Actual Losses: $15,000
• Impact: This business pays the average premium, matching its industry’s baseline.
Example 4: MOD = 0.90
An office-based company with a strong safety record and no recent claims.
• Payroll: $1,000,000
• Expected Losses: $10,000
• Actual Losses: $7,500
• Impact: This business enjoys a 10% reduction in premiums due to its exemplary claims history.
Regulation 59: Promoting Workplace Safety and Compliance
Regulation 59 was implemented to encourage businesses to address high MODs by adopting safety and risk management programs. Employers with MODs exceeding 1.30 are required to participate in a safety plan or risk improvement program to reduce claims frequency and severity.
Key features of Regulation 59 include:
1. Mandatory Safety Programs: Employers with high MODs must work with insurers to implement targeted safety measures.
2. Compliance Monitoring: Failure to comply can result in penalties or higher premium rates.
3. Long-Term Benefits: By reducing accidents, businesses can improve their MOD over time, leading to significant cost savings.
Take Control of Your Workers’ Comp Costs
Managing your Experience Modification Factor requires proactive safety management, claims handling, and expert insurance guidance. At BGES Group, we specialize in helping businesses in New York lower their MOD and secure better workers’ compensation coverage at competitive rates.
Contact Gary Wallach at 914-806-5853 or email bgesgroup@gmail.com to learn how we can help your business reduce costs, improve safety, and achieve peace of mind with tailored insurance solutions.