Workers Compensation-Experience Modification Factor

May 30, 2023
How does my workers compensation experience modification factor affect the insurance premium for my business?

Your workers' compensation experience modification factor, also known as an experience mod or mod factor, can have a significant impact on your insurance rates. The experience mod is a numerical representation of your company's past workers' compensation claims history compared to similar businesses in your industry. It is calculated by your insurance carrier or a rating bureau such as the National Council on Compensation Insurance (NCCI).

The experience mod factor is typically expressed as a percentage, with a baseline value of 1.0. A mod factor greater than 1.0 indicates that your company has had more claims than expected for a business of its size and industry, which may result in higher insurance rates. Conversely, a mod factor less than 1.0 suggests that your company has had fewer claims than expected, potentially leading to lower insurance rates.

Here's how your experience mod factor affects your rates:

  1. Impact on Premiums: The experience mod factor directly influences your workers' compensation premiums. If your mod factor is above 1.0, your rates will be higher than the standard premium. For example, if your mod factor is 1.2, your premiums will be 20% higher than the average. Conversely, if your mod factor is below 1.0, your premiums will be lower than the average.

  2. Cost Control: Maintaining a low experience mod factor is crucial for cost control. By effectively managing workplace safety, implementing risk management programs, and minimizing the frequency and severity of claims, you can keep your mod factor low. This, in turn, will result in lower insurance premiums.

  3. Competitive Advantage: A lower experience mod factor demonstrates to potential clients, partners, and investors that your company has a strong commitment to safety and risk management. This can give you a competitive advantage over other businesses in your industry when bidding for contracts or attracting customers who prioritize safety.

  4. Long-Term Impact: The experience mod factor is based on your company's past three years of claims data, with more weight given to recent years. Consequently, taking proactive measures to reduce workplace injuries, improve safety practices, and effectively manage claims can have a positive long-term impact on your mod factor and insurance rates.

It's important to note that the calculation and specific rules for determining experience mod factors can vary by jurisdiction. Insurance carriers or rating bureaus use a complex formula that takes into account your company's payroll, classification codes, and claims history to calculate the mod factor. Work closely with McDaniel Insurance to understand the factors influencing your mod factor and taking steps to improve safety and claims management can help control your workers' compensation costs.  Contact our agency at 502.655.7000 or email