You already know that Workers’ Compensation insurance protects your business and your employees when an injury happens on the job. But did you also know about a single number quietly steering how much you actually pay for that protection? It’s called your Experience Modification Rate — better known as the MOD. While we’ve touched on this subject before, here we’ll go deeper to provide insights into your what your MOD means.
1. What exactly is the MOD?
Think of the MOD as a personalized scorecard. Rating bureaus such as the National Council on Compensation Insurance (NCCI) compare your company’s actual claim costs with what’s statistically expected for businesses of your size and industry.
- MOD = 00 – You’re right on target with the industry average.
- MOD < 00 – Congratulations! Your loss history is better than average, so you earn a credit (lower premiums).
- MOD > 1.00 – Claims have outpaced expectations, so you receive a debit (higher premiums).
2. How is the MOD Calculated?
While the full actual formula could fill a small novel, here are the basics:
| Factor | Why It Matters |
| Claim Frequency & Severity | Frequent or severe injuries push the MOD up quickly. |
| Payroll Size | More payroll = more expected losses, providing a larger “credibility” factor. |
| Experience Period | The three full policy years excluding the current year feed the calculation. |
Pro Tip: A single large loss affects the MOD, but several smaller, more preventable claims often do more damage because they signal systemic issues in business operations and/or workplace safety.
3. Why Should Business Owners Care?
- Premium Impact: A higher MOD can add thousands to your annual spend, while a lower MOD can generate real cash savings.
- Competitive Edge: General contractors and public entities frequently set MOD thresholds (often 1.00) for bid eligibility. A high MOD can knock you out of the running for business before price is even discussed.
- Operational Insight: Tracking your MOD trend can shed light on the business’s safety culture, return‑to‑work effectiveness and overall risk management.
4. Four Practical Ways to Lower (or Maintain) Your MOD
- Build a Proactive Safety Program
Identify hazards, train regularly and celebrate zero‑incident milestones. Fewer injuries = fewer claims = more favorable MOD. - Establish a Rapid‑Response Claims Process
Report injuries to your carrier immediately. Early medical intervention and timely paperwork keep claim costs from snowballing. - Implement Return‑to‑Work (RTW) Options
Light‑duty or transitional roles shorten disability duration and cut indemnity payments — both key components in the MOD calculation. - Review Loss Runs with Your Agent
Schedule quarterly claim reviews. Spot patterns, challenge reserves that seem excessive and close stale claims that linger on the books.
5. Key Takeaways
- Your Experience MOD is one of the few measures you can directly influence to control Workers’ Comp expenses.
- Safety, swift claims handling and disciplined return-to-work programs are the primary pillars of a healthy MOD.
- Monitoring the MOD year‑over‑year offers a simple snapshot of your risk management progress.
Ready to put your MOD to work?
Need Workers’ Comp coverage or want to compare options? Get fast, easy quotes now at Direct WorkComp!
Missed an earlier 101 entry? Catch up on Understanding Workers’ Comp Coverage 101 and Filing a Workers’ Compensation Claim 101.
