Experience Modification

A key to understanding your Florida workers’ compensation premium is the experience modification factor, also known as your mod. Understanding your company’s mod and the data used to obtain it helps you identify ways to minimize your workers’ compensation premium.

​Most states use the National Council on Compensation Insurance (NCCI) to collect data and calculate the experience modification factor. The NCCI is a private corporation funded by member insurance companies. The remaining states either operate an independent workers’ compensation bureau or have set aside a state fund for workers’ compensation. These states may or may not use the NCCI’s classification system to determine experience modification factors.

The process of calculating the experience modification factor is complex, but the underlying theory and purpose of the formula is straightforward. Your company’s actual losses are compared to its expected losses by industry type. The formula incorporates factors that account for company size, unexpectedly large losses, and the incidence of loss frequency and loss severity to achieve a balance between fairness and accountability.

The mod factor represents either a credit or debit that is applied to your workers’ compensation premium. A mod factor greater than 1.0 is a debit mod, which means that your losses are worse than expected and a surcharge will be added to your premium. A mod factor less than 1.0 is a credit mod, which means losses are better than expected, resulting in a discounted premium.

Establishing a proactive safety program is an effective way to reduce losses, positively impacting your mod and workers’ compensation premium. Contact us today at 561-571-1001. We have the loss control experience to help you promote safety and control your workers’ compensation premium.