Experience modification rate

How it works

Workers’ comp rates start from your class codeClass codeA class code is a number insurers use to classify what your business does, so your rates reflect the typical risks of businesses doing similar work.Read the definition, which reflects the average losses of businesses doing similar work. Experience rating then adjusts for your own history. Under NCCI’s Experience Rating Plan, an employer’s payroll and losses are compared with those of the average employer in the same classification, and the result is a factor called the experience modification, or mod.

The mod multiplies your premium:

• 1.00 is average. Your premium isn’t adjusted.
• Below 1.00 is a credit. Your losses were better than expected, and your premium goes down.
• Above 1.00 is a debit. Your losses were worse than expected, and your premium goes up.

NCCI says the calculation usually uses three years of payroll and loss data. Your current policy isn’t included, so a mod effective in 2027 generally reflects policies that started a few years earlier. Experience rating is mandatory for employers that meet a state’s premium eligibility threshold. A business whose premium falls below that threshold doesn’t get a mod.

NCCI’s plan is used in many states, but not all. Some states use independent rating organizations, and four administer their own workers’ comp plans and rates. Check with your state’s workers’ compensation agency for the rules where you operate.

What moves the mod

NCCI’s plan gives more weight to how often you have claims than to how large they are. Each claim is split, and the first part of every claim counts more heavily than the rest. Very large claims are also capped. In most states, claims for medical care only, with no lost time, count for less.

Keeping people safe, reporting every injury as your policy requires and helping injured employees get back to work can all help over time. See how workers’ comp premiums are calculated for the full picture.