Determination of the Minimum Mod

        Understanding Your Modification Factor


The minimum mod, also known as the loss-free rating, is the lowest mod possible for your company. This value can be determined by plugging in zero actual primary and excess losses into the mod formula while maintaining the values for expected losses, ballast and weighting value. This gives the lowest mod value theoretically achievable by your company.

The minimum mod is not the same for all companies. For small companies (as measured by expected losses), the minimum mod can be in the range of 0.90. As the size of the company increases, the minimum mod decreases. For very large companies, the minimum mod may be 0.40 or even lower. Knowing your minimum mod is important for large and small companies. A large company with a mod of 0.95 may still be able to achieve significant savings through loss control and loss prevention activities. The company may perceive the 0.95 mod as “good.” However, if the minimum mod is 0.50, there is significant room for improvement. For a small company, the minimum mod can be used for setting realistic expectations; for example, a small company that sets a goal of having a 0.80 mod will not be able to achieve it under any circumstance if the minimum mod is 0.85.

Properly analyzing your mod can help you identify loss areas, set accurate goals 
and validate the cost of 
safety initiatives.

A mod analysis can provide valuable insight into your business operations and workers’ compensation losses. If you have a basic understanding of how a mod is calculated, you can use a few simple equations to gain a deeper understanding of the factors contributing to your number.