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NCCI Changes Experience Mod (E-Mod) Calculation – Analysis


NCCI Changes the Experience Mod Calculation

In my last post, I discussed the upcoming changes to the E-Mod calculation. The NCCI changes may look simple, but the cost of operating an unsafe business will be substantial. Your Risk Manager and Safety Department will be 100% more valuable overnight.

Picture of Empty book With Handwritten NCCI Changes Formula Graphics
(c) 123rf.com

I thought I would analyze the calculation on a very basic level and put everything in layperson terms so the difference between the two calculations shows the financial impact to a company. A safe company will also see a marked difference in their E-Mod in a positive direction.

The basic E-Mod Formula is Actual Losses / Expected Losses. See the bottom of this article for links to more info on some of the terms in this post.

Adding in the Primary and Excess Loss variables –

(Actual Primary Losses + Actual Excess Losses) / Expected Losses

If we break that down further the formula would be

E-Mod = (Total Actual Primary Losses + (Total Actual Excess Losses * Discount Factor))/Total Expected Losses


Let us look at a quick example. These are the numbers if a Mod is calculated before 2013. We are going to use a .3 discount factor for the excess losses. The Expected Losses are 57,750. The Expected Loss figure basically is calculated from payroll per classification code.

Claim NoLossPrimaryExcess


Picture Of Woman Hand NCCI changes Using Calculator

The E-Mod is calculated as:

(35,150 + (87,780 *.3))/57,750 = 1.06

After 2013 the numbers would change dramatically

Claim NoLossPrimaryExcess

The E-Mod is calculated as:

(62,930 + (60,930 *.3))/57,750 = 1.41

The numbers I had chosen for this example were from an actual policy and rating bureau/NCCI Experience Rating Sheets. The employer would have paid 25% more for the same Workers Compensation coverage.

There other parts of the premium calculation that will change the premium to a degree. I used this as more of an example. This is a stark example of what can happen if there is no E-Mod reduction plan by your company or organization.

For more information on the terms in this article, check out this post on calculating E-Mods and this one.

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Experience Mod Predictions Accurate?

Experience Mod Predictions – Accuracy Depends on Who/Whom You Ask Most Experience Mod predictions can be a tedious process that has cofounded most people working

James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management 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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