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Using the Experience Mod to pave way for more business

Pressed by today's economic conditions, more companies are looking for anything and everything to gain a competitive advantage. While often overlooked, a key differentiator is an employer's Experience Modification Factor (MOD). Workers' Compensation is both a significant employee benefit and also a powerful business benchmark that is carefully scrutinized by those who are evaluating possible business partners.

The MOD is the biggest driver of a company's Workers' Compensation rates, the lower the MOD, the lower the rates. Therefore, companies with lower modifiers have a lower cost structure, which helps make companies more competitive, leading to more jobs and higher profitability. The exact opposite is true as well; higher MOD, leads to higher costs, and it is more difficult to compete for work. However, there are more dire consequences for those with high MOD's—no work.

Let's face it. In today's environment, companies and Risk Managers are using the MOD as a significant determining factor to disqualify firms from bidding on projects. If an experience modifier is over 1.00, the company may be viewed as unsafe, and, therefore, disqualified. Companies know they need to do something about their MOD, but do not know what to do. The good news is that the MOD is as manageable as any other business function, as long as people are motivated to do so. Here are a few examples:

Each of these companies is far better positioned to compete by improving its Workers' Compensation performance.

With such striking results, what keeps companies from achieving such stellar performance? Our experience points to two primary factors:

But it doesn't need to be this way. Things can go right under the right conditions:

All of this is anything but an academic exercise. It's the process for creating a happy, productive and injury-free workforce, along with a business that is successful because it has a competitive advantage that makes it attractive to customers. And behind it all is the Experience Modification Factor. Risk Managers use the MOD as a benchmark rather than OSHA Recordable and DART (Days Away, Restricted Time). Unlike the OSHA log, third parties promulgate the MOD, such as the state Workers' Compensation rating bureau and insurance companies that create and provide the data, which are viewed as reliable sources.

The bottom line is clear: making a diligent effort to get a company's Experience Modification Factor to the lowest allowable level will produce a competitive advantage.