What is an experience modification rate and why does it matter?
An experience modification rate, usually called an experience mod or e-mod, is a number that adjusts your workers compensation premium up or down based on your past claims history compared to other businesses like yours. It matters because it can raise or lower what you pay by a large margin, year after year.
The system starts with a baseline mod of 1.0, which represents an average business in your industry. If your claims history is better than average, your mod drops below 1.0 and your premium falls. If it is worse than average, your mod climbs above 1.0 and your premium rises. The mod is a multiplier, so it scales the whole bill.
Here is how that plays out in dollars. Suppose your base workers compensation premium is $40,000 a year. With a mod of 0.85, reflecting a strong safety record, you pay $34,000. With a mod of 1.20, reflecting a history of claims, you pay $48,000. That is a $14,000 swing on the exact same payroll, driven entirely by your claims experience.
Your mod is calculated from several years of claims data, and it tends to weigh the number of claims even more heavily than their size. That detail surprises many business owners. Several small, frequent claims can hurt your mod more than one large claim, because frequency signals an ongoing safety problem rather than a one time accident.
How to improve your mod
Because the mod looks back several years, today’s safety efforts pay off down the road. Strong workplace safety programs, prompt injury reporting, a return to work plan that gets injured employees back on light duty, and careful claims management all help lower your mod over time. Fewer claims today mean a lower multiplier on future premiums.
Checking your mod for errors can also matter, because mistakes in the underlying data do happen, and a corrected figure can lower your premium.
Your experience mod is one of the biggest levers on your workers compensation cost. We can review your current mod, your premium, and your safety practices in a free coverage review to check whether you are overpaying.