A straightforward guide to one of the most misunderstood parts of workers’ compensation insurance.
If you’ve ever looked at your workers’ compensation premium and wondered, “Why did this go up?”, there’s a good chance your experience modification rate — or experience mod — played a role.
The experience mod affects what you pay for workers’ comp more than almost anything else.
But many businesses aren’t quite sure how it’s calculated, what influences it, or how much control they really have over it.
The good news?
Once you understand the basics, your experience mod becomes a powerful tool — not a mystery.
Let’s break it down in simple terms.
1. What Exactly Is an Experience Mod?
Think of your experience mod as an insurance scorecard.
It compares:
- Your past workplace injuries
to
- The expected claims for a business of your size and industry
Then it assigns you a number based on how you stack up.
The number usually looks like this:
- 1.00 → Average (you pay the standard rate)
- Below 1.00 → Better-than-average performance (you pay less)
- Above 1.00 → Worse-than-average performance (you pay more)
In other words, your experience mod is how the insurance world answers the question:“How safely does this business operate compared to others like it?”
2. How Your Experience Mod Impacts Your Workers’ Comp Premium
This part is simple:
Premium × Experience Mod = What You Actually Pay
Examples:
- A mod of 0.82 means you pay 18% less.
- A mod of 1.20 means you pay 20% more.
And because workers’ comp is often one of the largest insurance expenses for labor-driven businesses, a good mod can save thousands — sometimes tens of thousands — every year.
3. What Influences Your Experience Mod?
It’s not just the number of claims — it’s the type, severity, and frequency.
Key factors include:
Frequency matters more than severity
A business with:
One large claim
…may still have a reasonable mod.
But a business with:
Several small claims
…will almost always see the mod rise.
Why?
Because frequent injuries suggest a pattern of unsafe operations, which is more predictive of future risk.
Medical-only vs. lost-time claims
Insurance bureaus treat claims differently depending on whether an employee:
- Only required medical attention
or
- Missed work due to injury
Lost-time claims have a much bigger impact.
Your payroll and classification codes
Your payroll determines your expected losses — the baseline used to judge your performance.
Incorrect class codes or inaccurate reporting can distort your mod calculation.
Open claims and reserve levels
Your mod is calculated based on:
- Claims
- Plus reserves (money the insurer sets aside for future costs)
If reserves are inflated, your mod may be too.
The timeframe being reviewed
Experience mods look back over a 3-year period, excluding the current policy year.
So:
- A bad claim stays on your mod for three years
- Improvements take time to show
- Early action matters
4. Why Two Companies With Similar Operations Can Have Very Different Mods
This is one of the most frustrating parts for business owners.
Two companies with:
- The same industry
- The same number of employees
- The same payroll
…can have drastically different workers’ comp premiums simply because one has a cleaner loss
history.
That’s because workers’ comp pricing is driven by your actual experience, not just your
industry risk.
Real-world factors include:
- Safety culture
- New-hire training
- Return-to-work programs
- Reporting practices
- Supervisor involvement
- Claim follow-up
- Classification accuracy
Your insurance carrier sees all of this reflected in your mod.
5. Can You Lower Your Experience Mod? Yes — But It Takes a Plan
Lowering your mod isn’t about luck. It’s about intentional decisions.
Here are some practical ways businesses improve their mod over time:
Report claims promptly
Delays can increase costs — especially if minor injuries become major ones.Focus on small claims, not just major ones
Remember: frequency hurts your mod more than severity.
Reducing small incidents can have a big impact.
Implement a return-to-work program
Getting employees back on modified duty:
- Shortens lost-time claims
- Reduces reserves
- Lowers long-term mod impact
Close claims properly
Some claims remain open with unnecessary reserves simply because no one requested a review.
Fix classification errors
Even honest mistakes can inflate your expected losses or distort your mod.
Improve training and safety culture
Fewer injuries = lower mod.
It really is that direct.
Conduct mod audits
Sometimes experience mods are calculated incorrectly.
A simple audit can uncover:
- Misapplied claims
- Incorrect data
- Classification errors
- Reserve problems
Corrections can make a substantial difference.
6. What Businesses Often Get Wrong About Their Experience Mod
There are several common misconceptions:
“We had one big claim — our mod is ruined.”
Not necessarily.
Large claims have a cap on how much they count.
“A low mod means we don’t need to work on safety.”
Mod scores can rise quickly.
Safety is the only long-term fix.
“Our premium went up — the mod must be wrong.”
Not always.
Rates, classification changes, and payroll shifts also affect premium.
“The mod is fixed — we can’t control it.”
You absolutely can.
Your decisions, training, and claims strategy directly influence it.
The Bottom Line
Your experience mod isn’t a judgment of your business — it’s a reflection of:
- How your company manages injuries
- How quickly claims are handled
- How consistent your safety culture is
- How your operations compare to similar businesses
When you understand your mod, you gain a clearer view of:
- Why your premium looks the way it does
- How to control your future costs
- Where to focus to improve safety and financial performance
And the more confident you become with the system, the less confusing workers’ comp feels.
If you’d like help understanding your experience mod or reviewing ways to improve it, our team can walk you through the numbers and next steps.