Experience mods, or experience modifiers, are a factor used to adjust the premium on a business’s workers’ compensation policy. In California they’re calculated by the Workers’ Compensation Insurance Rating Bureau (WCIRB), and in most other states by NCCI, using the business’s payroll and claims history compared with similar businesses, and they are used to determine the likelihood of the business filing a workers’ compensation claim in the future.
For businesses with a good claims history, an experience mod can result in lower premiums for their workers’ compensation insurance. On the other hand, businesses with a higher number of claims or more severe claims may see an increase in their premiums due to a higher experience mod.
Experience mods are typically expressed as a decimal number, and they can range from 0.5 (indicating a lower risk of claims) to 1.5 or higher (indicating a higher risk of claims). An example would be if your experience mod is a 1.5 you are paying 50% more than your peers for your workers compensation policy! That means a competitor with a 1.0 mod pays about a third less than you for the same payroll. A variety of factors go into a business’s experience mod, including:
- The number of claims filed by the business (many small claims usually hurt your mod more than one large claim, because claim frequency is weighted heavily)
- The severity of those claims (measured by the amount of money paid out)
- The business’s size and industry
- The business’s safety record
- The business’s loss prevention efforts (carriers often give credits for strong loss prevention programs, and we help every client build one)
Experience mods are calculated using a formula that takes into account the above factors, as well as industry averages and other data. The formula typically uses three years of payroll and claims data, and the rating bureau publishes the result on an experience rating worksheet.
As a business owner, it’s important to understand your experience mod and how it can impact your workers’ compensation premiums. If your experience mod is higher than you would like, there are several steps you can take to try to lower it:
- Implement safety measures: By taking steps to prevent accidents and injuries on the job, you can reduce the likelihood of filing a workers’ compensation claim. This can include providing proper training and equipment, conducting regular safety inspections, and implementing safety protocols.
- Invest in injury prevention programs: Some insurance companies offer injury prevention programs that can help you identify and address potential safety hazards on the job. By participating in these programs, you may be able to reduce your experience mod and lower your premiums.
- Review and correct any errors: If you find errors in your company’s claims history, it’s important to address them as soon as possible. This can help ensure that your experience mod is accurate and that you are not paying higher premiums due to errors.
- Shop around for insurance: It’s always a good idea to shop around for insurance and compare quotes from multiple providers. This can help you find the best coverage at the most affordable price. That’s why it helps to work with an independent agent who can shop your workers’ comp policy and who knows workers’ comp and your industry.
By understanding your experience mod and taking steps to improve it, you can potentially lower your workers’ compensation premiums and protect your business in case of an on-the-job injury. It’s an important investment that can help safeguard your business, so it’s worth taking the time to understand and manage your experience mod.
