AWC Blog

Lower Your Workers Comp Premiums by Lowering Your Experience Mods

It’s the single most important factor in calculating the amount a business pays for workers compensation coverage and most people don’t know what it is, unless of course, you’ve been hit with an increase in premiums. The workers comp experience mods, sometimes called e-mods or ex mods, are calculations made to determine whether you should pay more or less in workers comp premiums.

What is a Workers Comp Experience Mod?

An experience mod is a way to compare like businesses within an industry to one another to determine the amount a company should pay for workers comp based, in part, on their own safety record. It’s a multiplier applied to your premium that can and should provide incentive for businesses to take safety seriously.

Any business with a premium of $4,000 before discounts is eligible for an experience mod. Businesses with lower premiums are considered to have a much lower exposure to claims and are not given a rating. Experience mod calculations are created using three year periods with an interval year prior to the rating year. For example, if an experience mod was calculated in 2014, the years used to determine losses are 2010, 2011, and 2012; 2013 is the interval year.

Most states rely on data from the National Council on Compensation Insurance (NCCI) to calculate experience mods. Some states have their own government-run bureaus who do the same thing for their individual state. As of July 1, 2018, Texas will work with NCCI instead of it’s own bureau.

If your business’s loss experience, the number of claims paid out, is higher than your industry’s average, your premium will increase. If it’s lower than the industry average, you receive a discount. All experience mods start at 1.0 and go up or down from there. With an experience mod of 0.75, you’ll pay 75 cents for every dollar of your premium, a 25 percent discount. For an ex mod of 1.15, you’ll pay $1.15 for every dollar, or a 15 percent surcharge.

How are Experience Mods Calculated?

When your experience mod is calculated, your business’s actual losses will be compared to expected losses in your industry. Like is compared to like, so if you’re a construction company with 10 employees, you’ll only be compared to other construction companies of similar size.

The frequency of claims is given greater weight in the formula than the severity of claims. Five claims in your business that cost the same as one claim for another business will be weighted differently. Experience mods were created to give incentives for workplace safety. The more workers comp claims you have, the more you pay.

To lower your experience mod, make sure you have a solid safety program and return-to-work plan in place. Also, communicate with and train your employees on safety. The fewer accidents you have and the sooner your employees return to work, the less money is paid out in claims.

What We Do

We understand experience mods inside and out. If you’re paying too much for your workers comp coverage or if you think there’s an error in your experience mod, we can help.

  1. There is an art in managing your experience mod.  If you leave it to chance or an inexperienced agent, you could end up spending considerably more than you should.  We work with you to understand your business and manage this aspect to your benefit.
  2. We’ll check for errors with your current experience mod by looking at your classification, losses reported, and other information.
  3. We’ll work with your insurer to make any necessary corrections.
  4. If your insurer won’t cooperate, we’ll take it to higher levels by going to NCCI or your state bureau. Appeals to your state department of insurance may be available as well.
  5. We will advocate on your behalf.  With our experienced agents on your side, your business will be in good hands.

Making safety in your business a priority is the biggest driver of experience mods and, ultimately, your workers comp premiums. You have more control over your premiums than you realize. If you think you’re paying too much or need help lowering your costs, our team is ready to help you lower your experience mods and premium. Contact us today and let’s get started.

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