Experience Modification Rate: What It Means and Why it Matters More Than You Think

The Experience Modification Rate goes by many names – E-Mod, EMR, X-Mod, Ex-Mod, Mod Rate. Regardless of what you call it, it’s one of the most important pieces of data a business owner will deal with. This single figure can quietly drive up your Workers’ Compensation premiums, knock you out of contract bids and shrink your profits without you even realizing it.

But here’s the good news: once you understand how the E-Mod works, it becomes a tool you can actually use. A strong E-Mod can help you cut costs, win work and prove your commitment to safety.

In this guide, we’ll break down what E-Mod really means, how it’s calculated, what affects it and why it reflects more than just insurance risk – it reflects how your business runs.

What Is an Experience Modification Rate?

Think of your Experience Modification Rate as a report card on your company’s safety record. It compares your actual employee injuries and workers’ comp claims to what’s typical for businesses like yours.

Your E-Mod is calculated by the National Council on Compensation Insurance or a state rating agency, and usually falls between 0.50 and 2.00, with 1.00 being the industry average for companies similar to yours.

Here’s a quick cheat sheet:

• E-Mod below 1.0 = You’re doing better than average and insurance providers see you as a safer bet.
• E-Mod of 1.0 = You’re right on par with companies similar to yours.
• E-Mod above 1.0 = Your claims are higher than expected, so your risk (and your premiums) are likely to increase.

Even a small shift in your E-Mod can make a noticeable difference. A company with an E-Mod of 1.20 could be paying 20% more for Workers’ Compensation than average and 40% more than a competitor with an E-Mod of 0.80. 

How Is Experience Modification Rate Calculated?

The E-Mod is based on real data from your business over time. Specifically, it looks at three years of claim history, not including the most recent policy year, plus your total payroll by job classification and the industry you operate in.

Here’s what goes into the formula:

Expected Losses

This is the number of claims you’re expected to have based on your:

• Industry classification
• Payroll size

Larger businesses in higher-risk industries will naturally have higher expected losses, so this system adjusts accordingly.

Actual Losses

This is your real-world claim history, which includes:

• Medical-only claims (minor injuries that don’t keep someone off the job)
• Lost-time claims (where someone’s injury causes them to miss work)

Lost-time claims weigh more because they signal more serious disruptions to your employees and your operations. We’ll hit on this more later on.

Claim Weighting (Split Point System)

Not all claims are treated equally. Claims frequency is weighted more heavily than claims severity. There are two potential parts to a claim – primary losses and excess losses.

• Primary losses: This is the dollar amount of the claim under the split point. The split point, as the name implies, is the dollar amount where a claim splits between primary and excess loss. The full weight of the primary loss is counted against you.  
• Excess losses: These are claims that are over the split point. The dollar amount over and above the split point is discounted significantly, which reduces the impact on your E-Mod calculation. This is why claim frequency hurts you more than claim severity.

This system penalizes frequent claims more than occasional larger ones since repeat issues usually point to unsafe practices or a lack of training.

Credibility Modifier

The smaller your business, the more one claim can skew your E-Mod.

Larger companies have more data, so individual claims move the needle less. That’s why the E-Mod formula includes a credibility modifier – it helps even the playing field between companies of different sizes.

For smaller teams, this makes consistent safety habits even more important.

Why Experience Modification Rate Matters for Your Business

Your Experience Modification Rate isn’t just an internal metric – it tells a story. To insurers, partners and clients, it signals how well you manage workplace risk. Depending on where that number falls, it can either save you money or quietly cost you opportunities.

Here’s how it plays out:

It Directly Impacts Your Insurance Premiums

Think of your E-Mod as a pricing dial for your workers’ comp policy.

• The lower your score, the less you pay.
• The higher it climbs, the more your premiums go up.

Let’s say your base premium is $75,000:

• An E-Mod of 0.80 could reduce that to $60,000
• An E-Mod of 1.20 might push it up to $90,000

Insurance carriers also use the E-Mod to gauge your safety culture, which means that a high score can raise red flags even when you’re shopping for other policies like general liability or commercial auto.

It Can Make or Break Your Bid Eligibility

In industries like construction, your Experience Modification Rate doesn’t just impact your premiums, it can impact your pipeline.

Many project owners and general contractors require a sub-1.0 E-Mod just to qualify for a job. If you’re above that mark, you may never even make it to the table. This becomes especially important as you deal with global companies, larger contractors or government contracts.

It Reflects How Seriously You Take Safety

Inside your business, Experience Modification Rate is a pulse check on your safety culture. Outside, it’s a reputation-builder. It tells employees you prioritize their well-being, clients that you run a tight ship and insurers that you take risk seriously.

You may have an excellent safety culture and still experience an E-Mod increase. Often, this is due to lack of understanding in how the E-Mod is calculated. You’re more greatly impacted if the injury results in lost time for that employee, if it’s classified as one certain type of injury over another, and even what body part is injured.

Luckily, if you take the time to understand what goes into the E-Mod, you may be able to reduce your rate.

How to Improve Your Experience Modification Rate

Once you understand what your Experience Modification Rate reflects, and how much it affects your bottom line, the next question is: how do you improve it?

There’s no quick fix. The E-Mod looks at performance over time, so improvement takes consistency. But with the right steps, the rewards add up: lower premiums, better client trust and a safer workforce.

Here’s how to start shifting the needle:

Build a Culture of Safety – Not Just Compliance

The most obvious impact to your E-Mod comes from safety practices.

Too often, safety gets reduced to a list of rules. But if you want lasting impact, it needs to be part of how your business actually runs.

For many teams, working with a dedicated safety consultant can make that shift more manageable – helping you identify blind spots, ensuring your jobsite or facilities are safe, and build a program that fits the way your people work.

We break this down even further in our article on how safety programs directly impact your E-Mod – including what to focus on first if you’re just getting started.

Support Recovery with a Return to Work Program

Like we mentioned earlier, lost-time claims weigh more heavily on your E-Mod than medical-only claims. That’s why a return-to-work program can make such a big difference.

By creating light-duty or transitional roles for injured employees, you can often keep claims classified as medical-only instead of lost-time. That shift can reduce the claim’s impact by 70% in some states.

If you’re exploring how to put this in place, this breakdown of return to work strategies can help you build one that works for your people and your bottom line.

Encourage Healthcare Providers Experienced in Your Industry

Everyone has the right to choose their own healthcare providers. As an employer, you are allowed to suggest providers who you know have experienced in your industry.

For example, if your employee drives a skid loader all day and breaks a finger, he may not need to miss time. But if that same employee swings a hammer all day or is doing detailed work that requires dexterity in his finger, he may need to shift his duties. A doctor experienced in the construction industry may be able to help specify duties more than a general physician.

In addition to preferred providers, you should also have a form that specifies exactly which duties can or cannot be performed. This will help you find a role for the employee that may not require them to miss time, thus helping your E-Mod.

Use Data to Catch Problems Early

Your claims history isn’t just paperwork – it’s a map. Every injury, no matter how small, is a clue. Maybe the same type of incident is happening in one department. Maybe new hires are getting hurt more often. When you track and review every incident, patterns start to emerge.

That’s when you can step in with better training, updated procedures or equipment changes before a small issue turns into a long-term trend.

Train the Leaders on Your Front Lines

Your frontline leaders are the first to spot risks and respond. But do they know what to do?

Investing in supervisor training doesn’t just protect your team. It helps ensure incidents are documented correctly, temporary duty options are explored and your safety culture has champions at every level.

We can help do that through our leadership training program.

Your E-Mod Is Just the Start – Let’s Talk About the Bigger Picture

At the end of the day, your Experience Modification Rate definition is more than just a number – it’s a reflection of how your business manages risk. It signals whether you’re being reactive or proactive, whether safety is a priority or an afterthought.

Improving your E-Mod is important. But it’s not the full story.

To build a business that lasts, you need to look at the bigger picture: How are you preventing injuries in the first place? What happens when someone does get hurt? Are your supervisors trained to lead on safety? Are your providers aligned with your goals? Do you have a return-to-work plan that works?

That’s what holistic risk management is all about – connecting the dots between prevention, response and long-term strategy. And it’s where many businesses realize they need more than just a policy. They need a partner.

Inside the ENCORE Safety Network

The ENCORE Safety Network was built to give business owners the support they need to create and sustain a real safety culture – not just a paper program.

Here’s just some of what we offer:

• Jobsite Inspections
• OSHA Recordkeeping
• E-Mod Management
• Workers’ Compensation Insurance
• Group Training & Education
• Leadership Training

The Safety Network is more than a service. It’s a network of support that helps you move from compliance to culture, from reacting to risks to getting ahead of them.

Because when you treat safety as part of your strategy – not just a checklist – everything else gets easier: hiring, retention, uptime, claims, premiums and peace of mind. 

Connect with our team and see how we can help you protect your purpose today.