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Experience Modification Factor

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Experience Modification Rate

A workers compensation experience mod will result in either a credit or a debit being applied to an Employer's premium quoted by an insurance company.

Workers Compensation Experience Rating

How is an Experience Mod Determined?

NCCI issues modifiers for employers with over $5,000 in premium over a few year or $10,000 in a single year.  An Experience modifier is an adjustment factor assigned to an Employer FEIN by a rating bureau (NCCI or State).  It compares loss data to other employers with the same class codes and is expressed as a credit or debit.

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Workers Compensation Experience Rating

Workers compensation experience rating is a mandatory program of individual company risk rating which compares an employer's past actual experience to the expected or average experience in a state.  An experience modification is developed and applied to risks with premium large enough for the insured's past experience to be an indicator of how much benefit costs will be paid on behalf of the insured in the future. If an employer's past experience is better or worse than average, his premium is adjusted downward or upward, respectively.

In general insurance terminology, experience rating refers to a record of premiums and losses under a policy. This provides a basis to predict future rates or costs.

Workers Compensation Experience Rating Definition

1. The comparison of the basis of premium (usually payroll) and losses developed by an employer during a policy period.

2. The loss record of an insured.

3. The history established by a risk as disclosed by the losses and the payroll appearing on the unit card. The premium paid is compared to losses paid out on an insurance policy.

4. The aggregate premium or losses developed within a state during a period of time as reflected in a financial call.

Experience Rating Modification

The modification is a factor applied to the policy premium for a risk to reflect variation from the experience of the average risk of a similar type. From the risk's own past experience, the experience modification rate is determined by comparing actual losses to expected losses. This comparison of future losses results in a premium reduction (credit) or a premium increase (debit).

For example, a modification of .85 results in a 15% credit or savings to the risk, while a modification of 1.10 produces a 10% debit or additional charge to the risk. In some cases, no change results and a modification of 1.00 (unity) is applied.

Experience Modification Factor (MOD)

In computing insurance premiums, experience modification factor refers to a provision for premium adjustment that recognized the merits or demerits of individual risks.

The modifier or "MOD" is a factor calculated from actual case loss experience, as reported on the unit statistical reports, used to adjust an insured's manual premiums (up or down). It compares the insured's experience to average class experience related to the same class codes.

Workers' compensation costs fall into three categories Incurred, Paid, and Reserved

Paid Losses  

Money spent on a claim


Money set aside (outstanding) for future payments

Incurred Losses  

Combined total of paid plus reserved amounts

NCCI Credit Modifier

A credit experience rating modification lowers the net premium cost of the insured. A credit experience rating modification shows that the insured has less than average loss experience.

NCCI Debit Modifier

A debit experience rating modification increases the net premium cost of the insured. A debit experience rating modification shows that the insured has greater than average loss experience.

How workers compensations costs affect experience rate mods.

Qualifications for an NCCI Experience Rating

A risk is eligible for an experience rating when the payrolls or other exposures developed in the last year or last two years of the experience period produced a qualifying premium, which varies by state. If based on more than two years, a higher qualifying premium is required. To qualify for interstate (multi-state)experience rating a risk must be eligible for intrastate (single state) experience rating and develop exposure in at least one additional state subscribing to interstate rating.

Expected Loss Rate (ELR)

ELR is the factor used in the experience rating calculation that estimates average anticipated loss levels of a classification for the experience rating period. The ELR factor is calculated for each classification and is applied per hundred dollars of payroll for that classification.

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Reduce Your Experience Mod Over Time

As a new employer all companies start out with a 1.00 modification factor.  This means there is no plus or minus modification adjustment on your insurance premium.

Over time many employers will begin receiving an NCCI or state modification notice 60 - 90 days prior to their renewal.  Your insurance company will also receive the notice and will adjust your renewal quote accordingly.

An experience modifier rate under a 1.00 factor is a positive  experience and means you are being rewarded for having little to no claims.  A MOD rate over a 1.00 factor means you are above the industry norm for claims in your state, based on your class codes


If you receive an experience modification rate notice that indicates your MOD is changing to 1.10 it means that your insurance carrier or any other provider will charge you an additional 10% for your work comp rates.  Conversely, a .90 modifier means you will pay 10% less on your renewal policy.

Our Workmans Comp Specialists are trained to review and analyze experience modifier rates to help ensure that your MOD is accurate.  We will work with you on strategies to help you reduce your experience modifier over time in order to correct any debit MOD's.

Give us a call today at (888) 611-7467 for a free experience modifier rate review or start a workers compensation insurance quote online today.

Workers Compensation Experience Modfication


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