An experience modification rate is a factor that adjusts a workers compensation premium up or down by comparing an employer's actual losses with the losses expected for other employers of the same size in the same classifications. A mod of 1.00 is average. A 1.25 debit mod adds 25% to manual premium, a 0.80 credit mod cuts it 20%.
You will see the mod on the policy's Information Page, in Item 4, where it multiplies the premium subject to experience rating. It is the single number most clients ask about at renewal.
Experience Modification Rate
A factor calculated under an experience rating plan, most often NCCI's, that modifies workers compensation premium based on an employer's own loss history relative to expected losses for its class and payroll.
How is the emod calculated?
Insurers report each employer's payroll and losses to NCCI through unit statistical reports, filed 18 months after policy inception and updated annually after that. NCCI's Experience Rating Plan then compares actual losses against expected losses for the employer's class codes and payroll over a three year experience period. The period excludes the most recent policy year, because its claims are too green to value reliably. So a 2026 mod is built from the 2022, 2023, and 2024 policy years.
This lag matters in practice: a bad claim year hits the mod the following year and stays in the formula for three renewals. An employer qualifies for experience rating once its premium clears a state specific eligibility threshold, either in a single year or cumulatively across the period. Below that threshold, the business simply pays manual rates with no mod at all.
Why do small claims hurt the mod more than one big one?
The formula splits every claim at a dollar threshold called the split point, which NCCI indexes annually for claim inflation. Losses below the split point are primary losses and enter the formula at close to full weight. The portion above it is excess loss, which is discounted heavily and capped.
The logic is that frequency predicts future losses better than severity: an employer with ten $15,000 claims is signaling a broken safety culture, while one $150,000 claim may be bad luck. Ten small claims can therefore raise a mod more than a single large one totaling the same dollars.
This is also why medical only claims get special treatment. In most NCCI states they are reduced by 70% before entering the formula, a real incentive to report even minor injuries rather than pay them out of pocket, which Part Four of the policy prohibits anyway.
What should you check before renewal?
Pull the NCCI mod worksheet and reconcile every claim against current loss runs. Look for claims listed at stale reserve values, claims that closed below the reserve reported at the unit stat valuation date, and recoveries that never made it into the data. Subrogation recoveries reduce reported losses, so a claim recovered at 100% should not be dragging the mod.
Payroll errors and wrong class codes distort expected losses just as badly as bad claim data. If the numbers on the worksheet do not match the carrier's own loss runs, request a correction and a mod revision through NCCI or the state rating bureau. The mechanics of the underlying policy are covered in our workers compensation insurance guide.
Frequently asked questions
What is a good experience mod rate?
Anything under 1.00 beats the average for your class and payroll size. Well run employers in hazardous classes often sit between 0.75 and 0.90. Many general contractors and project owners now require subs to hold a mod below 1.00 as a bid qualification.
How long does a claim affect my emod?
Three renewal cycles. The experience period uses three policy years and skips the most recent one, so a claim first enters the mod about two years after the injury and drops out three years later as the window rolls forward.
Can I lower my mod before renewal?
You can correct it, not negotiate it. Close stale open claims, verify reserves at the unit stat valuation date, confirm subrogation recoveries were reported, and fix payroll or class code errors. Genuine reductions come from fewer claims, which takes a safety program and time.
Who calculates the experience modification rate?
NCCI in most states, using carrier reported unit statistical data. A handful of states, including California, New York, and Wisconsin, run independent rating bureaus with their own formulas. The concept is the same, the split points and eligibility thresholds differ.
This definition is for educational purposes. Your policy's specific terms, conditions, and endorsements control. Talk to a licensed broker about your actual exposures.