How an Experience Mod Can Affect Workers Compensation Insurance Premiums

An experience mod or ‘e-mod’ is a modifier that has the ability to lower or raise your workers compensation premium based on your loss history.  It is an important number that business owners should pay close attention to in an effort to  control workers compensation premium costs each year.  

Read, ‘Calculating Workers Compensation Premium.’

What is an Experience Mod?

  • An experience mod is a number that applies to your workers compensation policy. It adjusts the base premium lower for accounts that are better than average from a loss perspective, and adjusts the base premium higher for accounts that are below average from a loss perspective.
  • The experience mod is a number which compares your company’s loss history – both frequency and severity – with similar companies – your competitors. The experience mod is calculated based on your company’s previous 3-year loss experience, not including the current policy year. As an example, if your policy year runs from 1-1-21 to 1-1-22, the calculation uses the loss history from the 2017, 2018 and 2019 policy years. Losses from 2021, the current policy year, are not included.
  • The experience mod is calculated by National Council on Compensation Insurance (NCCI) in most states Society Insurance writes business in. Some states, like Minnesota and Wisconsin, have their own plan manuals and follow their plan rules to develop their experience mods.
  • For companies with interstate exposures, NCCI will develop an interstate factor using the payroll and losses we report in our statistical data to arrive at the experience factor based on their plan rules and the state specific plans rules that may apply.
  • An experience mod is not based on premium. It will affect your premium, but it’s based on payroll and the losses attributable to the class codes on the account using either the NCCI formulas or the applicable state formulas. The experience mod rating bureau – NCCI or state plan – recognizes and measures the frequency and severity of losses.

Who Qualifies for Experience Mods?

All states have set premium levels where the mod is  automatically calculated – you don’t have a choice. Current levels are adjusted by each state yearly.  Check with your insurance agent to determine the premium levels for your state to see if you are eligible for an experience mod.

How Experience Mods Can Affect Insurance Premiums

  • The base premium for your account is based on the rates applied to what you do (calculated by NCCI or a state plan) and your payroll numbers.  The base premium is multiplied by your experience mod to determine your final premium. 
  • A simple example would be that your base premium is $10,000.  We submit your loss history to the appropriate workers compensation rating bureau each year and they put this information into a formula to determine your experience mod.  We then multiply the base premium by the experience mod factor to determine your premium.  An average experience mod is 1.0 which we would multiply by your base premium.  Thus, we would multiply the $10,000 base premium by the 1.0 experience mod to arrive at a final premium of $10,000.
  • If your company has a good loss history your experience mod would be below 1.0.  Let’s say your experience mod is 0.75.  In our example, we would multiply this number by the base premium of $10,000 to arrive at a premium of $7,500.  This is a $2,500 savings over the company that has a 1.0 experience mod.
  • If your company has a poor loss history your experience mod would be above 1.0.  Let’s say your experience mod is 1.25.  In our example, we would multiply this number by the base premium of $10,000 to arrive at a final premium of $12,500.  This is an additional $2, 500 over the base premium. 
  • Getting that mod below 1.0 is where the cost savings come into play for your business.  

Learn about Insurance Premium Audits.

Society Insurance is Here For You

Controlling your experience mod is up to you. Some basic safety programs can play a big role in reducing your experience mod and reducing your workers compensation premium. These programs include:

  1. Written safety program, including a safety orientation checklist for the safety rules and regulations new employees are expected to comply with
  2. Early return-to-work program
  3. Use of the Society Insurance free safety video library for all customers

Contact your Society Insurance risk control representative for assistance or discuss with your insurance agent.

Author

Paul is a graduate of the University of Wisconsin - Whitewater with a degree in Occupational Safety. He is a Certified Safety Professional (CSP) with over 33 years of experience in the safety field.

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