March 3, 2021
By Rebecca Batisto
Safety is essential to every company. A dangerous workplace harms employees, physically and mentally. Lost time due to workplace mishaps negatively impacts a company’s overall productivity and directly impacts insurance rates.
When an insurance agent takes on a client, safety is always at the top of the agenda. However, one aspect that might be overlooked but holds significant value is the MOD Rate. Why should you care about a possible client’s MOD Rate? What is a MOD Rate? Let’s take a look…
As you probably know, an MOD Rate (or Experience Modification Rate) is a gauge to compare one company’s safety record with another. Depending on how a company stacks up with another dictates their insurance premiums for the year. The safer a company is, the better their rates.
With that in mind, the MOD Rate is calculated by taking a company’s size, money lost from workers’ compensation claims, cash set aside for future claims, and the total paid and reserve funds over a period of three years. Paid losses from claims can include medical attention only and any time lost due to an accident.
In the beginning, a company is assigned a rate of 1. What does this number mean? It means you are considered safe. The more claims a company accrues, the higher their number, and subsequently, the higher their premium. As you can guess, a rating below 1 gets companies a lower premium.
A company’s MOD Rate is more important than ever. With COVID-19 still out of control worldwide, employees are taking more time off to deal with the virus. As a result, some states, like California, are removing COVID-19 from the MOD Rate completely. The more you are aware of your state’s regulations, the better you can serve your clients. Though basing decisions on MOD Rate can feel tough, the fact of the matter is that the rating has become an industry standard.
You still might be asking this question: What does the MOD mean to insurance agents?
Without diligence, the speed at which workers’ compensation claims are dealt with could lengthen drastically, further affecting the MOD rate. At Normandy Insurance, timely claims closure is just one benefit of our balanced approached to claims management. Claims that are allowed to inappropriately age, produce poor clinical outcomes for injured workers and as a result, negative financial consequences for employers that can last years. As an agent, you should advise your clients about the importance and benefits of keeping their MOD low.
A poor MOD Rate affects a company’s insurance policy premiums and how it interacts with the wider financial world. A company with a bad MOD Rate may affect its ability to borrow loans from banks and other financial institutes. No funds mean no room to offer competitive wages in the job market.
And it isn’t just about the money; a low MOD Rate affects everything. An unsafe work environment leads to distrust from other companies, causing lost projects, and partnerships. Companies with low MOD scores are even barred from bidding on government projects. Within the company, employees won’t feel happy or safe in poor work conditions. Along with money lost from workers’ comp claims, this can result in you losing employees due to low company morale.
At Normandy Insurance Company, we help our clients as quickly and efficiently as possible. If you want more resources to help your clients drop their MOD rate (or you want more clients, period), contact us and become an agent with Normandy today: https://info.normandyins.com/learn-more/