Do You Know Your Lowest Possible Cost for Workers Comp Insurance

Robert Bailey Sr Vice President and Workers Compensation Practice Leader

Make Oregon Workers Compensation Insurance Work for Your Company, Part II:

Step 1: Determine Your Lowest Possible Cost for Workers Compensation Insurance
Step 2: Make a Plan to Get There

In Oregon, your workers compensation insurance premiums are linked to your loss experience (claims) through the Experience Rating. The rating is then used to determine your experience modification factor, or experience mod, which determines the insurance rates your company pays. For more on how it works, check out Part I.

Determine the Lowest Cost

An experience mod of 1.00 is the average. Unfortunately, too many insurance agents and employers mistake average for good. In reality, a 1.00 mod is like receiving a “C” on your report card. A conscientious company will strive to do better than average by decreasing their losses thereby lowering their workers comp insurance costs.

As part of doing better, it’s valuable to compute your minimum mod, know your current mod and then identify your controllable mod.

The Minimum Mod

The minimum mod is calculated using the appropriate payroll for the risk with zero losses. This gives the lowest mod value theoretically achievable by that risk.

The minimum mod is not the same for all companies. For small companies (as measured by expected losses), it can be as high as 0.90. As the size of the company increases, the minimum mod decreases. For very large companies, the minimum mod can go as low as 0.25.

The Controllable Mod

The controllable mod is the difference between the current mod and the minimum mod. For example, say a risk has a current mod of 0.95. If the minimum mod is computed to be 0.50 (the value of the mod if no losses had occurred), then the controllable mod is 0.45 (0.95 – 0.50).

This controllable piece of the mod is a direct result of the losses that occurred during the experience rating period. Thus, this is the piece of the mod that your company can control by lowering losses.

Make a Plan

The minimum mod and controllable mod are important for two reasons:

For large risks — These values highlight the savings that are possible by controlling losses. A large risk with a mod of 0.95 may still be able to achieve significant savings through loss control and loss prevention. The 0.95 mod may be considered “good,” but if the minimum mod is 0.50, there is significant room for improvement.
For small risks — These values can be used for setting realistic expectations. For example, a small risk that sets a goal of having a 0.80 mod will not be able to achieve it under any circumstances if the minimum mod is 0.85.

Understanding the minimum and controllable mods will help explain your total mod-based premium, enabling you to better identify the potential for workers’ comp premium savings.

More information:

Check out Part I in the series: Manage Your Annual Unit Statistical Card. (Jeff DeHaan’s post on our Worker’s Compensation Blog).

If you want to learn more about the Montgomery & Graham Property & Casualty Workers’ Compensation Audit Program and how it can help your business please email me at

To find out more about M&G Property and Casualty please click here:

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