What Is A Good Experience Modification Rate?

If your Experience Modification Rate is below a 1.00, you are better than at least half of the businesses in your industry within the states where you operate.  Also, if you are below a 1.00, you are probably not missing out on new business opportunities from disqualification due to poor claims experience.  If you are unsure to what I am referring, you can learn about Experience Modification Rates as business qualifiers through some of our blog posts like this one.

Since you multiply your Experience Modification Rate by Manual Premium, you can't have an Experience Mod of zero (0.00) right?  That means you'd pay nothing for work comp insurance (which would be nice!).  

 

The best, lowest possible Experience Modification Rate you can have is something called your Minimum Experience Mod or Minimum Mod.  This is what your Experience Modification Rate would be if you removed all of the claims from your experience mod.

 

There is a short cut to calculating your Minimum Mod.  Go grab a copy of your experience modification worksheet.  See in the example below the circled Stabilizing Value and Expected Total Loss figure?  Divide Stabilizing Value by your Expected Total Loss and you will get your Minimum Experience Modification Rate.  In this example the client's actual experience mod is a .94 and the minimum mod is a .56. 

Minimum Mod .56 = Stabilizing Value 282,864 / Expected Totals 500,816

So, what is a good Experience Modification Rate?  Good is anything below a 1.00 if for no other reason than you are receiving a discount on the premiums you pay to your insurance carrier.  As you move away from 1.00 toward your minimum mod, you are moving from good toward great.

Stuart Cytron

stuart@cytrongroup.com

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