An experience modifier, sometimes called an experience modification or e-mod, is an adjustment of an employer’s premium for workers’ compensation coverage based on the losses the insurer has experienced from that employer. Typically, three full years of payroll and loss information are used in the calculation that produces a factor applied for one year.

The experience modifier is calculated by the National Council on Compensation Insurance (NCCI) according to the terms of the Experience Rating Plan Manual. The plan is mandatory for all employers who qualify.

The average experience modifier for a given industry is a factor of 1.0. If the actual claims experience during the rating period is higher than the expected claims experience for the industry, the experience modifier will be above 1.0 and will increase the premium calculation. An experience mod above 1.0 suggests an employer is more likely to have claims than other employers within its industry.

Conversely, if the actual claims experience for an individual employer was lower than the expected claims experience for the industry, the experience modifier would be below 1.0 and will decrease the premium calculation. This factor would suggest an employer is less likely to have claims than other employers within its industry.

If a business does not qualify for an experience rating, a factor of 1.0 is used in the premium calculation.