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Basic Mod Formula Calculation Easier To Follow Than Rating Bureau


Most Basic Mod Formula

The most Basic Mod formula how is it calculated?

We receive a large number of calls and emailed questions on how Mods (E-Mods or X-Mods) are promulgated by NCCI, WCIRB,  or State Rating Bureau.

One of the most common scenarios is when an employer’s  Mod increases over 1.0. A very large number of contractors now require a 1.0 Mod or less for their subcontracting companies.   Mods at the 1.0 level are now more difficult to attain due to the recent NCCI changes on Mod calculations.  A more accurate statement is that an employer with a Mod of 1.2 or above will find increasing difficulty in lowering their Mod back to 1.0. I had hoped the contractors would increase the acceptable subcontractor Mod to 1.1 due to the changes in the E-Mod calculations.  This has not been the case whatsoever.  One contractor had told me that “an unsafe company is still an unsafe company.”

Graphic Of Graph Basic Mod Formula Icon

The basic inputs into the Mod are:

  • Payroll
  • Classification Codes
  • Claims Total Incurred (Paid + Reserves)

The Mod formula measures:

Actual Losses / Expected Losses

The Expected Losses originate from the first two bullet points.   In other words, what claims are expected for the level of the payroll of each classification code?   The Actual Loss figure is the Total Incurred for a given year.

As the level of payroll increases,  the level of Expected Losses will increase overall.  Increased losses are more likely with a higher number of employees or work hours.   If the Actual Losses (Claims) do not increase, then the Mod will decrease in most cases.

There is actually a large amount of “number voodoo” required to calculate the Actual and  Expected Losses.

If the Rating Bureau Mod formula seems confusing, just remember the basic Mod formula.

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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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