Workers' Comp Experience Mod (E-Mod) Explained

What the experience mod is

The experience mod is a multiplier that compares your business's actual workers' comp losses with the losses expected for a business of your size in your industry.

• A mod of 1.00 means your losses are in line with what's expected.
• A mod above 1.00, a debit, means losses are higher than expected and generally increases your premium.
• A mod below 1.00, a credit, means losses are lower than expected and generally reduces your premium.

For example, a mod of 1.20 generally raises the premium it applies to by 20 percent, and a mod of 0.85 generally lowers it by 15 percent.

Who calculates it

Your insurer doesn't set your mod. It's calculated by a rating organization. In many states that's the National Council on Compensation Insurance (NCCI). Some states have their own bureau. In California, mods are calculated by the Workers' Compensation Insurance Rating Bureau of California (WCIRB). Not every business qualifies for a mod. Eligibility depends on premium or payroll size and differs by state.

How it's calculated, in plain terms

The full formula is technical, but the main pieces are:

1. Experience period. Usually about three years of policy data, generally excluding the most recent year.
2. Expected losses. Your payroll by class code multiplied by expected loss rates for those classes. This is what a typical business of your size and type would be expected to incur.
3. Actual losses. The claims your business had during the experience period, paid and reserved.
4. Primary vs. excess losses. Each claim is split. The first portion, the primary loss, counts heavily. The amount above that point counts less or, in some systems, not at all. That means claim frequency often affects your mod more than one large claim.
5. Stabilizing factors. Weighting and ballast values keep small businesses' mods from swinging wildly because of one claim.

The mod is roughly your adjusted actual losses divided by your adjusted expected losses. Rules, split points and weights vary by rating organization.

Why the mod matters beyond premium

Many project owners, general contractors and public agencies ask for your experience mod during bidding or prequalification. Some set a maximum mod for eligibility. A high mod can cost you work as well as premium, which is why contractors in particular watch it closely.

Steps that can help your mod over time

The mod reflects history, so changes take time. Employers commonly focus on:

• Preventing injuries. Safety training, equipment and supervision that reduce how often injuries happen.
• Reporting claims promptly. Late-reported claims often cost more.
• Return-to-work programs. Modified-duty jobs can help injured employees return sooner and can reduce wage-replacement costs.
• Reviewing loss runs. Check that claims are coded and reserved correctly, and that closed claims show as closed.
• Checking the mod worksheet. Confirm the payroll, class codes and claims used match your records. Ask your agent to help request corrections if something is wrong.
• Handling small medical-only claims correctly. Some rating systems give certain medical-only claims reduced weight. Don't try to keep claims off the books. Report every injury as required by law.

Mods after ownership changes

When a business is sold, merged or restructured, the rating organization may transfer the prior experience to the new entity under its ownership-change rules. Report ownership changes as required. Changing the business name or entity doesn't by itself reset a mod.

Frequently asked questions

What is a good experience mod?

A mod below 1.00 means your losses have been better than expected for your industry and size. What counts as acceptable for a contract depends on the project owner's requirements.

How often does my mod change?

Mods are generally recalculated annually, ahead of your policy's rating date.

Can one claim raise my mod?

It can, but because of how losses are split, several smaller claims often affect the mod more than one large claim.

Does switching insurers change my mod?

No. The mod is calculated by the rating organization and follows your business, not your insurer.

My business is new. Do I have a mod?

New and smaller businesses often don't qualify for a mod yet and are rated without one until they meet the eligibility threshold.

Where can I find my mod?

It appears on your policy or rating worksheet, and your agent can obtain the worksheet from the rating organization or insurer.