What is the Experience Modification Factor?

Your experience mod is a numerical representation of your claims history. It is the ratio of the costs of your company’s actual workers’ compensation claims compared to the expected costs for companies of similar size in the same industry. It can be either above or below the industry average of 1.0. Above 1.0 means your claims history is worse than the industry’s average for workers’ compensation insurance while below 1.0 means it is better.

How is an Experience Modification Factor Calculated?

Your experience mod is calculated by the National Council on Compensation Insurance (NCCI) or your state’s workers’ compensation rating bureau. A formula that considers the ratio between expected losses in your industry and the losses your organization actually incurred, as well as both the frequency and severity of those losses, is used to determine your experience mod. An organization with one large loss will be penalized less severely than a company with many small losses because a higher frequency of claims is an indication that you may experience additional losses in the future.

How Does My Experience Modification Factor Affect My Premium?

Workers’ compensation base premium is calculated by multiplying rates based on payroll classifications and the hours worked by those classes. The base premium is then multiplied by the experience mod. An experience mod less than 1.0 creates a credit while an experience mod greater than 1.0 creates a debit.

How Can I Improve My Experience Modification Factor?

Since any work-related accident or injury affects your experience mod.  Implementing our Return To Work Program Builder will get you on the way to managing injuries in the most efficient way possible.  Make certain you have a robust safety program in place to mitigate accidents before they ever happen.