Compensation Experience

Workers’ compensation insurance can be a significant expense for employers. While the formula for calculating workers’ comp premiums can seem shrouded in mystery, a business may be able to influence these premiums by understanding a key number called the “Experience Modification Rate” (E-Mod).

What Is the E-Mod?

Insurance companies use the E-Mod to calculate workers’ compensation premiums. The E-Mod is derived from data gathered by the National Council on Compensation Insurance or other rating agency, depending on the state in which you do business. This information is used to estimate your expected losses, taking into account factors like your company size, industry and frequency and seriousness of past claims.

An E-Mod of 100% is deemed to be the benchmark average for determining the premiums for your business. If your E-Mod is greater than 100%, your workers’ compensation premiums will be higher than average; if your E-Mod falls below 100%, your premiums will be lower than average.

How Can You Reduce Your E-Mod?

As noted by Caitlin Morgan Insurance Services, an employer may lower its E-Mod by implementing measures to limit potential workers’ compensation claims. For example, you can adopt detailed safety procedures, provide comprehensive workplace safety training and recognize safe behaviors with incentives. If a claim does arise, have a plan to promptly investigate, manage and close the claim.

By being proactive with workplace safety, you may be able to exercise some control over workers’ comp claims, lowering your Experience Modification Rate and realizing savings on your premiums.