Workers’ compensation is a vital part of protecting employees and maintaining a safe workplace. Yet the cost of coverage can vary widely depending on your company’s claims history and its workers' compensation experience rate – often called the mod rate, E-MOD rate, the workers' compensation experience rate, or work comp modifier. This figure compares your actual claims to what’s expected for a business of your size, and it plays a direct role in determining your premiums.
For business owners, understanding how the workers' compensation experience modification rate is calculated – and the steps you can take to lower your mod rate – is essential for reducing workers' compensation insurance costs and strengthening workplace safety.
The workers' Compensation experience modification rate – sometimes called the mod rate, E-MOD rate, the workers' compensation experience rate, or work comp modifier – is a numerical factor used by insurance companies to calculate an employer's workers' compensation premiums.
The rate is based on your business’ past workers' compensation claims and is used to determine if your premiums should be increased or decreased. This comparison is known as the "expected losses" vs. "actual losses." If your company’s actual losses are higher than expected losses, your mod rate will go up – and likely so will your premiums.
Your mod rate is often an indication of the safety culture at your business, meaning businesses with a lower mod rate are considered less risky and may be eligible for lower premiums. However, it is solely an indication and should never be used as a full measure of safety within an organization. If you have a high mod rate, you’ll pay higher premiums. But you should also focus on reducing your rate – not only for the cost associated, but also for the safety of your employees.
Consider partnering with an insurance provider who can offer resources and support to help employers reduce your mod rate and control your workers' compensation costs. At Ellerbrock-Norris, we have the ENCORE Workers’ Compensation program, which includes implementing a culture of working safely, pre-injury and post-injury action plans, ongoing claims management, Recover at Work Programs, annual Experience Mod analysis, and more.
The National Council on Compensation Insurance (NCCI) dictates your workers’ comp experience modification rate, though some states require different ratings factors that can impact your final mod rate. The NCCI uses a formula based on your company's actual loss compared to the average loss for similar companies in your industry.
In other words, the workers' comp mod factor reflects how your payroll, claims, and expected losses all work together to define your level of risk.
The formula uses three primary factors:
The formula generates your official mod rate. A rate of 1.0 is considered average, meaning your loss experience is on par with the industry average. A rate below 1.0 means you’ve had a better-than-average loss experience, leading to lower premiums, while a rate above 1.0 indicates a higher risk and potential for future claims, resulting in higher premiums.
Lowering your workers' compensation experience modification rate – often called the mod rate, E-MOD rate, the workers' compensation experience rate, or work comp modifier – requires a strategic approach focused on improving workplace safety, reducing the frequency and severity of workers' compensation claims, and effectively and quickly managing claims when they do occur.
In fact, the U.S. Department of Labor notes that experience-rating encourages employers to ensure safety by insurance costs directly to workplace injury performance. In other words, maintaining a safer workplace – with fewer claims – not only protects employees, but also lowers your mod rate and premiums, aligning financial incentives with injury prevention.
We help our clients create a culture of working safely based on your specific needs. If you don’t have a robust safety program in place, consider focusing on the culture at your business, including:
The workers' compensation experience modification rate – sometimes referred to as the mod rate, E-MOD rate, the workers' compensation experience rate, or work comp modifier – is a critical factor in determining your insurance costs. Understanding the factors that contribute to your mod rate and taking proactive steps to reduce it can help you control your workers' compensation costs and improve your bottom line.
By implementing a comprehensive safety program, focusing on risk management, partnering with a quality insurance carrier, and engaging an experienced consultant, you can reduce your mod rate and create a safer and more productive workplace for your employees.
The Ellerbrock-Norris ENCORE Safety Network is a great starting point for your firm. Not only will we hold in-person training with your safety professionals, we’ll also provide regular education, including webinars, videos and more.
Find a trusted safety partner and workers' compensation advisor today to help control your experience modification rate and control your insurance premiums.