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Workers compensation insurance experience rating is a mandatory program designed to measure and
rate the risk of individual companies against other businesses in the same industry. Experience rating compares an
actual claims experience to the expected or average experience of all similar
business types within 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, or
claims, 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 by the application of the Emod, respectively.
In general, employer experience rating refers to a record of premiums and losses
over the course of all applicable prior work comp polices. This provides a basis to predict future rates or costs
for insurance carriers.
An employers' experience modification rate refers the factor calculated from actual loss experience amd
used to adjust an the businesses manual premiums (higher or lower) based on the businesses loss experience
relative to the average underlying
manual premiums. The Modifier (X-mod) compares the insured experience to the average
Business owners and insurance agents use numerous interchangeable terms when referring to their experience
modification rate. Synonyms include: EMT Rating, X-mod, Emod, ncci credit, mod rate, experience modification
factor, ncci worksheet and EMR number.
The intent and purpose of experience rating is to incentivize business owners to take meaningful actions to reduce
and prevent injuries. Workers comp manual rates group employers by their class codes, but that does not differentiate a business with no
claims from a business averaging several claims a year. The business with no claims should pay less for coverage.
The business with more claims should pay a larger share of the premium needed to provide for the cost of the
A business will not have an Emod for the first 1-3 years after it opens. Some very small businesses may never
qualify for an experience modifier in some states. Qualifying for an EMR rating will vary by state, but the
overall concept is the same. There are two triggers for qualification:
As an example, the state of Missouri has a one year threshold of $7,000 in premium before a business will be
assigned and Emod and a Rating Effective Date (RED). Otherwise, the business will need premium to exceed $3,500
for more than two policy periods before it can qualify for an EMR rating. Each state sets their own dollar value
for x-mod qualification.
Who Calculates Experience Ratings?
NCCI administers workers' compensation experience rating for 39 states. All business owners have a right to request
their experience modification rate worksheet from NCCI or their state authority. States that administer their own
EMR Rating programs include:
Here's Example of an NCCI Worksheet
The workers comp experience modification worksheet is a summary of claims and losses. It indicates how expected
losses compare to actual losses over a period of time. Each year, qualifying businesses will receive a new Emod
worksheet about 90 days prior to their Rating Effective Date.
What is NCCI?
A modification factor 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.
In computing insurance premiums, experience modification factor refers to a
provision for premium adjustment that recognized the merits or demerits of
The modifier or "Emod" 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 industries.
Workers' Compensation CLaims Costs- 3 Categories:
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
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.
The easy answer is that any experience modification factor below 1.00 is a good rating. Since 1.00 is average, or
neutral, any Emod below 1.00 means that business is performing better than average for other businesses in the
same industry and state. Some industries are expected to have more claims than others because of the associated
risks. That is part of what drives rates and its why EMR Ratings are specific to industries.
Each state will have specific elements that will affect the lowest possible Emod in that state. The lowest
experience modification rate we've seen was an agency customer in California. Their mod rate was 0.48; so they
were achieving significant savings on premium. This client had several million dollars in payroll and generated an
annual premium over $250,000. They had no prior claims in an industry that normally has a frequent number of
As an agency, we've worked with client Emod's well over 2.00. Most commonly, we see a range of mod rates between
.80 and 1.50.
What Affects your EMR Rating?
Think of an experience modification rate a a look back at your coverage history. Three years of policy information
is used when calculating the EMR Ratings of each Rating Effective Date. The most recent past policy is excluded.
Experience rating is only looking at the 3 years of coverage prior to the most current past policy. Therefore, a
2020 Emod would be based on policies that expired in 2018, 2017 and 2016.
Their are 3 important thing to consider when trying to understand how experience modification factors are
Premium is an important factor because it impacts the ratio between expected losses and actual losses sustained
during a policy period. Expected losses are the average expectations for the cost of claims during the policy.
Ultimately, the goal is to have actual losses come in under expected losses. This will generate a credit
modification factor below 1.00. Frequency is also part of the equation because it increases the odds of having an expensive claim.
We leverage your EMR Rating to negotiate better deals with insurance companies.
All new employers purchasing workers comp start out with a 1.00 modification factor.
This means there is no plus or minus (credit/debit) modification adjustment on your
Over time, many employers will begin receiving an NCCI or state modification notice
60 - 90 days prior to their annual renewal date. Your insurance company will also
receive the notice and will adjust your renewal prices accordingly.
An experience modifier rate under a 1.00 factor is a positive experience and means
you will be rewarded for having little to no claims with a credit modifier. An Emod
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 Emod is
changing to 1.10, it means that your insurance carrier (or any other provider) will
charge you an additional 10% for your workers comp rates. Conversely, a .90 modifier
means you will pay 10% less on your next renewal policy.
Our Workmans Comp Specialists are trained to review and analyze experience
modification rates and worksheets to help ensure that your mod rate is accurate and
appropriate. We will work with you on strategies to help you reduce your experience
modifier over time in order to correct prior debit Emod's.
Get a free insurance comparison today and see if your business qualifies for lower
A business owner has the ability to request copies of their experience rating worksheet from any state authority,
or NCCI, depending on the state. Business owners can call NCCI at 800-622-4123. Choose option 4 once connected. Owners may be asked
detailed company information, such as FEIN, to confirm ownership. NCCI will email the experience mod worksheet to
the owner. This service is free to business owners.
Insurance agents and carriers can order a basic snapshot showing the current Emod for a business. This
document is less detailed than the full NCCI Worksheet because it does not show the loss details for the past
policies. Agents are required to obtain a signed Letter of Authority from the business owner in order to request
the full worksheet from NCCI.
NCCI Worksheet Letter of Authority
Save 30% on work comp for select businesses
An EMR Rating is a numerical factor used to manipulate a carriers filed workers comp rates. Here are a few
ways to think of experience rating:
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