Determining the Controllable Mod
Understanding Your Modification Factor
The controllable mod is the difference between your current mod and your minimum mod. This is the variable piece of your mod that fluctuates with losses. The controllable mod can be broken into the contribution made by primary losses and by excess losses. This helps you to identify the exact contribution of loss frequency and loss severity to your mod. By estimating your basic premium (the premium prior to application of the mod), you can calculate the cost of primary and excess losses in terms of increased premium. You calculate this by multiplying the premium by the increase in the mod caused by primary or excess losses. This will assist you in determining the potential value of loss prevention, loss control and safety programs.
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.