The 4 Keys to Understanding your MOD Rate
By Mike Sizemore and Michael Rosado
Welcome back for our second installment on worker’s compensation, risk management and why these issues are critical to you and your business.
In today’s article, we are going to discuss the 4 basic keys to understanding your worker’s compensation insurance modification rate and why it’s so important. The first step in anything that you do is to know the facts, so let’s get started.
First Key: What is a Modification Rate?
The worker’s compensation modification rate is the percentage that is applied to an employer’s insurance premium to account for the increased risk of claims. This rate is determined by several factors, including the industry in which the business operates and the safety record of your company. For instance, if your organization is primarily clerical, the modification rate will be lower due to fewer claims and less risk industry-wide. Conversely, if your primary occupation is roofing construction, the modification rate will be higher due to the increased risk of on-the-job accidents. So if you are thinking about starting a business and not sure what costs may be associated with your chosen field, please consider investigating the work comp classification code for that specific industry. This information may be found on the website for the Georgia Division of Worker’s Compensation, NCCI, or better yet our team of Risk Management and insurance professionals is more than willing to assist you.
Second Key: How is the Modification Rate Determined?
The worker’s compensation modification rate ranges from 0-20%, with lower rates being applied to employers who operate in less dangerous industries. So who, exactly works to determine MOD rates in the state of Georgia? The Georgia Department of Division of Worker’s Compensation, NCCI, and the insurance companies all play a role in setting these rates. The National Council on Compensation Insurance (NCCI) is a nonprofit organization that provides workers’ compensation insurance data and predictive tools to insurers, agents, employers, and other users. NCCI also maintains worker’s compensation databases in Georgia as well as other states. The Georgia Division of Worker’s Compensation (GDWC) is responsible for setting minimum standards for the private market. So, what role does my agent play in this? Your insurance agent is responsible for helping to ensure that your business is classified in the most appropriate industry code, which will then help to determine your worker’s compensation modification rate. The agent may also have some latitude in discounts that are available to you. So it’s very important to have a great relationship with your agent and always be willing to ask about these discounts.
Third Key: How does the MOD rate affect my cost?
Let’s break it down in easy terms. If your modification rate is 10%, it will increase the cost of your insurance by 10%! For example, if you are paying $4,000 for workers’ compensation coverage on a volume of annual payroll ranging from $500K-$600K, a MOD rate of 10% would raise your premium to $4,400. On the other hand, if your modification rate is 1% or less, it is likely that you will see a decrease in your workers’ compensation premium. Again why is this important? Insurance Modification rates don’t just affect your business today, this continues every year until the next review. How often does this occur? Every two years, most insurance carriers will send out a notice to continue your policy at the same rate, even though it can be reviewed more often if they choose. So, one of the most effective ways to see positive results on your bottom line is to manage the risks that affect worker’s compensation rates and ask your agent each time the policy comes up for renewal. Again relationships are KEY!
Fourth Key: Is there anything I can do to help reduce my MOD rate?
There are several things you can do as an employer to help reduce your worker’s compensation modification rate. First, make sure that all of your employees are properly trained in safety procedures and that safety is a top priority in your workplace. Second, ask your insurance carrier about their risk management team. Many carriers have experts on staff who can help assess your business and make recommendations for reducing risk. Next, consider joining a trade association. These often have safety programs in place that can help reduce the number of accidents and injuries in the workplace. Do you have an accident plan in place should one occur at work? Having a plan in place for how to respond quickly can help minimize the damage and save you money. Does your organization perform after accident assessments? This is when your team reviews an accident and makes recommendations to help prevent them in the future. And last, always be looking for light-duty assignments when appropriate. This helps to take some of the pressure off of you as the employer and shows your staff that you care about their wellbeing and wanting to them back at work as soon as possible. So being proactive and working closely with your insurance carrier can make a significant difference in reducing your worker’s compensation modification rate, as well as the overall cost for coverage.
Let’s wrap up today with a quick review our discussion. First, know what a MOD rate is and how it affects your company. Next, it’s always important to know how the rate is determined, specific to your industry. And just because you may be in a higher-risk industry, that doesn’t necessarily mean you are going to be paying higher rates. Having the right agent and a quality risk management team in your corner not only saves you money today but most certainly will for years to come. Then, count the cost! Remember those rates can stay with you for years, so make sure you understand ALL the parameters around your policy. And finally, cost reductions happen when safety is your first concern. Hire right, train right, and reinforce safety everywhere you can. Then should an injury occur, respond quickly, get your employee all the help they need, show concern, check on them frequently, and get them back to work as soon as possible.
This article is the second in a four part series on Risk Management and Safety provided by Mike Sizemore Consulting and The Omni Insurance Agency. The contributors are Mike Sizemore, a graduate of Georgia Southern University with over 30 years of experience in leadership, management and customer experience and Michael Rosado, CPCU, ARM, Code Rule 59/60 Consultant, and Director of Risk Manager at the Omni Insurance Agency.
For additional information or to book an appointment, simply contact Mike Sizemore by email at mike@mikesizemorellc.com
