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.
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.
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.
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