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What is an Experience Modification Rate?

Your business’s Experience Modification Rate (Experience Mod/E-Mod) compares your workers’ compensation claims experience to other organizations in the same industry based on job duty classification code.

It’s a way to tailor the cost of insurance to the characteristics of your business while giving you the opportunity to manage your costs.

Experience mod formula is showing that actual primary losses + ballest value + weighting value + 1-weighting value + expected excess losses divided by expected primary losses + ballest value + weighting value + actual excess losses + 1 - weighting value + expected excess losses = current mod

Understanding Experience Mod

The Mod Formula

The Experience Mod formula is shown here. Fortunately, it is not as important to understand the mathematics as much as understanding the key factors that you can control, including: 

Ballast Value

This value stabilizes the values in the formula. Ballast values increase with the size of the business and is most impactful on smaller companies.

Weighting Value

This value recognizes that excess losses are less related to the operations of business (as compared to random occurrence). The value is less for smaller companies and increases with company size.

These calculations result in frequency of losses having a higher impact to the experience mod than severity.

An example showing that debit mod manual premium of $100,000 times the mod of 1.25 equals the premium you pay of $125,000

How Experience Mod Affects Premiums

Your Mod represents the cost of losses over a three year period that shows either a credit or debit that’s applied to your workers’ compensation premium. Controlling your Mod means controlling your premium.

Your Mod is affected by both the number of losses that your company incurs and the amount of those losses.

The loss values used in the Mod calculation include reserves on open claims.

How to Control Your Experience Mod

Reduce the number and severity of workers' compensation claims through safety programs, return to work programs and appropriate prevention procedures.

Return to work program

Return injured employees back to the job sooner through transitional duty programs. This can drastically decrease the financial impact of the claim to the Experience Mod and your premium.

Proactive claims reporting and review

The first two days after an employee is injured on the job are always the most important. After that, staying proactive and engaged with claims reviews can control reserves and close claims faster.

Train and audit for continuous improvement

A competency-based safety program lowers accidents. When incidents do occur, the safety program fully evaluates the issue and finds the root cause to prevent recurrence, create better morale and improve employee retention.

We can also help you with...

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Risk Assessment

A risk assessment is an important part of any business plan. Without one, your business faces a variety of threats with no plan of response or attempts to reduce those threats.

LEARN MORE more about risk assessment.

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Kelly Ouimet
Kelly Ouimet, AVP Commercial Insurance Consultant, Racine, WI

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