What Is an Experience Modification Rate? (And How Errors Inflate Your Premium)

If your business pays more than a few thousand dollars a year for workers compensation insurance, your experience mod is one of the biggest levers on what you pay. Most owners have never seen their mod worksheet. This guide explains how the number is built, why it changes, and where errors sneak in.

What is an experience modification rate?

The experience modification rate (also called an e-mod, EMR, or just "the mod") is a factor most workers comp carriers apply to your premium once your business is large enough to qualify for experience rating. In most states the calculation is run by NCCI, the National Council on Compensation Insurance, or by an independent state rating bureau.

The idea is simple: your actual losses are compared to the losses expected for a business of your size and industry. Run better than your peers and you pay less. Run worse and you pay more.

How is the e-mod calculated?

The formula compares actual losses to expected losses across a three-year window:

• Rating window: three completed policy years, excluding the most recently completed year. For a 2026 policy, that generally means 2022, 2023, and 2024.
• Actual losses: what your claims cost, with smaller "primary" losses weighted more heavily than large ones, because frequency predicts future risk better than one bad claim.
• Expected losses: what businesses with your payroll and class codes are expected to lose on average.

Actual divided by expected (with weighting and ballast values that soften swings for smaller employers) produces your mod. Your carrier multiplies your premium by that number.

What a mod above 1.0 actually costs you

A mod of 1.25 means a 25 percent surcharge on your entire workers comp premium. On a $100,000 premium, that is $25,000 a year, every year the mod stays elevated. For businesses in high-rate industries like construction trades or staffing, a bad mod can also disqualify you from bidding on jobs that require an EMR under 1.0.

Why your mod might be wrong

The mod is only as accurate as the data behind it. Common errors include:

• Claims reported against the wrong policy or the wrong employer
• Claim reserves left open or overstated after a claim settled for less
• Payroll misreported, which distorts expected losses
• Ownership changes applied incorrectly, carrying old losses to a new entity

Any of these inflates the multiplier applied to every dollar you pay. Errors can often be corrected retroactively, and confirmed overcharges may be recoverable. That is exactly what our free workers comp premium audit checks.

How to keep your mod healthy

Beyond checking the data, the mod rewards claim prevention and fast response: safety training, prompt claim reporting, return-to-work programs that get injured employees on light duty, and an annual review of your mod worksheet with your broker. Illinois businesses can lean on our Illinois workers compensation team for that review, and see our guide to workers comp for Illinois small businesses for the basics.

Work With Pro Insurance Group

Pro Insurance Group is an independent brokerage based in Elgin, IL, serving businesses in 40+ states through 20+ A-rated carriers. We re-shop your coverage at every renewal and review the numbers behind your premium, not just the quote. No agency fees, ever.

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