Understanding your Workers’ Comp Modification

The key to calculating a workers’ compensation premium is the experience modification factor, also known as your mod. Understanding your company’s mod and the data used to obtain it helps you identify ways to minimize your workers’ compensation premium.

Who calculates the mod factor?


How is a mod calculated?


How does my mod affect my premiums?

The mod factor represents either a credit or debit that is applied to your workers’ compensation premium. A mod
factor greater than 1.0 is a debit mod, which means that your losses are worse than expected and a surcharge will be added to your premium. A mod factor less than 1.0 is a credit mod, which means losses are better than expected, resulting in a discounted premium.

What is the experience rating period?

The mod is calculated using loss and payroll data for an experience rating period. The experience rating period typically includes data for three policy years, excluding the most recently completed year. For example, for a mod factor calculated on January 1, 2012, data would be used for the January 1, 2008-2009, January 1, 2009-2010 and January 1, 2010-2011 policy periods. The data for the January 1, 2011- 2012 would be excluded.

Three years of data is used to provide a more accurate reflection of the losses, smoothing out the impact of any exceptionally bad or good year for losses.



Expected losses are then calculated using your payroll data by state and class code and applying the Expected Loss Ratio (ELR). The ELR is provided by each state’s rating bureau. These figures are also broken down into expected primary losses and expected excess losses.

How do your losses compare?

The final mod calculation compares your actual primary and excess loss figures to those expected for a company of the same size and industry type. To understand how workers’ compensation losses to your business compare to state industry averages, contact IronRisk Strategies to review your experience modification worksheet.

How can you control your mod?

Your mod factor has a direct impact on your workers’ compensation premium. The key to controlling your insurance costs is accident prevention.
– The mod is calculated based on data reported to the rating bureau by past insurers. Incorrect or incomplete data can cause incorrect mod factors. Review loss and payroll data to ensure the calculation is complete and accurate.
– Develop a sound safety program, return to work program and appropriate prevention procedures to reduce loss frequency.
– An effective self-inspection and accident investigation program are critical to managing claim frequency.
– Report all claims to your carrier immediately.
– Train employees on their responsibilities for safety, and enforce violations.
Frequently communicate with employees on a formal and informal basis regarding the importance of safety.

How can your experience rating save you money?

Establishing a proactive safety program is an effective way to reduce losses, positively impacting your mod and workers’ compensation premium. Contact us today at (443) 377-7896. We have the loss control experience to help you promote safety and control your workers’ compensation premium.