Experience Modification Factors

Experience Modifiers are used in the pricing of Workers’ Compensation Insurance to
adjust the premium upward or downward based on the employer’s claims history. The
Experience Modification Factor can be compared to your personal driving record in that
you are charged more or less premium based on you past accident experience. Your claim
experience modifies your future cost of coverage. The Mod is a number that compares the
accident experience of individual company’s to all other company’s in state and in the
industry. The Mod is promulgated or calculated by the National Council on Compensation
Insurance (NCCI). NCCI produces an Experience Modification Factor Worksheet. A copy
is sent to the carrier who provides the Work Comp coverage and the employer. The carrier
will apply the Mod to the premium calculation formula so, Mods impact premium cost.
UNITY or having a Mod of 1.00 indicates that your performance compared with your
competitors is average and no surcharge or debit is assessed, however, no benefit or credit
is given.
DEBIT Mod is when an employers’ number of and/or severity of accidents is higher than
competitors and the cost of insurance will increase. Expected Losses are the amount of
claim dollars planned to be spent on injuries and is a compilation of all employers’
experience. Actual Dollars spent is used to compare your experience to all competitors. A
modifier above 1.00 such as 1.01, 1.10, and 1.23, etc or any number above 1.00 may result
in an increase premium by 1%, 10% or 23%, respectively.
CREDIT Mod is when an employers’ claim activity is better then industry competitors
and the cost of insurance may decrease. This is a Modifier below such as .99, .88, .75, etc
or any number below 1.00. The result is to decrease premium by 1%, 12% or 25%,
The Mod is calculated using employers actual claim data for 3 of the past 4 years with the
most recent past year not being included because some claims may have occurred close to
the end of the policy year and may still be open.
Data Years used in Mod Calculation:
If your effective date of coverage is 1-01-XX (also called the Normal Anniversary Rating
Date) your Experience Modification Factor would use the claims data from the years of:
2010 – Experience Modification Factor uses claims from 3 of past 4 years.
2009- No data used as this is the most recent year and claims are not settled.
2008- Claims data is used -both closed and open (unsettled) claims with
Reserves (called Incurred Losses) have a negative impact on Mod.
2007- Claims data is used -both open and closed data is used.
2006-Claims data is used – both open and closed data is used.