Experience Modification Factor Mysterious Number

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Experience Modification Factor Known By Many Names

We have received quite a large number of questions regarding the Workers Comp Experience Modification Factor over the past few weeks.

The Experience Modification Factor also goes by Experience Modification Rating, and Experience Modifier.

Picture of Man Hand Experience Modification Draw Arrow Inside House with Dollars sign
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The E-Mod has many acronyms such as:

  • Ex-Mod (California)
  • X-Mod (California)
  • Mod (National)
  • E-Mod (National)
  • EMR
  • ExMod, XMod, and EMod.

The definition of an E-Mod is: A multiplier applied to the premium of a qualifying policy and provides an incentive for loss prevention. The mod represents either a credit or debit that is applied to the premium before discounts. If your company’s loss experience is more costly on average than other companies’ loss experiences in your industry, the result is a debit mod, or surcharge, on premiums. If your company’s experience is less costly than the industry average, you will receive a credit mod, or discount, on your premium.

There are three types of E-Mods:

  • Debit –  More Than 1.0
  • Credit-  Less Than 1.0
  • Neutral – Equal to 1.0

E-Mods are one of the most confusing areas of Workers Comp insurance, as it affects such a large number of policies.

Experience Modification Factor Calculations Easy Formula

The E-Mod X-Mod calculations are simpler than one might think. The experience modification is determined by comparing actual losses to expected losses for the experience period based upon the employer’s industry. In other words, clerical employees are compared only to other clerical employees; a restaurant is compared only to other restaurants.

Vector Graphic of Man and dollars sign E-Mod X-Mod in background
StockUnlimited

The number of man-hours worked is used to indicate the employer’s audited premium dollars, since an employer with 200 employees would be expected to have more claims than an employer with two employees. For example, a restaurant is only compared to other restaurants with approximately the same gross premium amount.

The formula adjusts the actual losses used so that frequency is given greater weight than the severity of an injury or illness. For example, six claims that occur over a three-year period totaling $20,000 have a greater impact against the experience mod than one claim in three years totaling $20,000. Again, both the industry and business size are considered. Claims with zero costs are not included in the experience modification calculation.

Bottom Line – why does this sound so hard? The harder it sounds, the less you can check behind the insurer to make sure there were no mistakes in your policy or premium/payroll audit.    

Educating yourself on how the Mod system work will help you realize the way you are charged for your Workers Comp premiums.  Check out the many articles on the workers comp insurance rating system in the blog.    Click on the E-Mod X-Mod Category at the bottom of this article to view pages upon pages of articles to help you in your quest. 

If you need any assistance, we are here to help by using our Contact Us page. 

©J&L Risk Management Inc Copyright Notice

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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