Risk Resources Newsletter: How Your Experience Modifier Can Impact Your Insurance Costs

For business leaders, managing costs is a critical part of maintaining a healthy bottom line. One area where many businesses may be able to make a significant impact is their workers' compensation insurance costs, particularly through their experience modifier (often referred to as an “experience mod” or simply "mod").

What Is an Experience Modifier?

The experience modifier is a numerical rating used by insurance companies to assess the risk of a business compared to others in the same industry. It is based on your company’s actual claims history and payroll data over the past few years, typically three years excluding the most recent policy year.
 

An experience modifier of:

• 1.0 indicates your claims history is average for your industry.
• Below 1.0 reflects better-than-average claims performance, leading to lower premiums.
• Above 1.0 signals higher-than-average claims, resulting in higher premiums.
   

For example, a company with an experience modifier of 0.80 will typically pay 20% less in workers' compensation premiums than average, while a company with a mod of 1.20 will typically pay 20% more.
 

Note that not all businesses are experienced rated.  Several factors determine whether a business is eligible for or subject to an experience mod, including whether it is a new venture, the amount of premium generated, its classification codes, and other state specific considerations.

How Does Your Experience Modifier Impact Your Insurance Rates?

Insurance companies use your experience modifier to adjust the base premium rate for your workers' compensation policy. A higher experience mod means you'll typically pay more for coverage, while a lower mod can result in substantial savings.
 

To put it into perspective, here is an illustrative example:

• If your workers' compensation base premium is $100,000 and your experience modifier is 1.2, your adjusted premium will be $120,000.
• Conversely, if your mod is 0.8, your adjusted premium will be $80,000.
   

This means your experience modifier can have a significant impact on your annual workers’ compensation insurance costs.

How Can You Impact Your Modifier?

The good news is that you have some control over your experience modifier. Here are a few helpful steps you can take to improve it:
 

Focus on Safety:
 

• Implement robust safety programs tailored to your industry.
• Conduct regular safety training for employees and management.
• Ensure compliance with OSHA regulations and other safety standards.
   

Investigate and Prevent Claims:
 

• Promptly investigate workplace accidents to identify root causes.
• Address hazards immediately to help prevent future incidents.
• Develop a culture of safety where employees feel encouraged to report risks or near misses.
   

Return-to-Work Programs:
 

• Establish a return-to-work program to help injured employees transition back into the workplace.
• Light-duty roles or modified responsibilities can help reduce the length and cost of claims.
   

Monitor Claims Closely:
 

• Work closely with your insurance provider to manage open claims efficiently.
• Verify claims are accurate and legitimate to help avoid unnecessary costs.
   

Hire Strategically:
 

• Screen new hires for safety awareness and physical capabilities for their roles.
• Provide thorough onboarding and training for all employees.
   

Review Payroll Classifications:
 

• Ensure employees are classified correctly for workers' compensation purposes, as errors can inflate your costs.
   

Note: the above represents strategies a company might consider to help lower its experience modifier.  This list is not exhaustive and should not be considered a comprehensive guide; companies should consult a qualified insurance or risk management professional for advice tailored to their specific situation. 
 

Lowering your experience modifier doesn’t just help you save money on insurance—it can position your business as a safer, more reliable partner. A strong safety record reflected in a low modifier not only helps reduce costs but also enhances your credibility in the eyes of customers, employees, and stakeholders.

In Conclusion

By understanding your experience modifier and taking proactive steps to improve it, you may be able to save money, gain access to better business opportunities, and foster a safer workplace culture. For personalized guidance, reach out to your insurance advisor or risk management consultant. Safety is an investment, and improving your experience modifier is one of the best ways to secure long-term success.
 

Ready to learn more? Contact us today to learn how Acrisure can help your company improve safety or learn more about our business solutions now.
 

About the Author
Brian Fielkow, Acrisure Risk Resources
 

Brian Fielkow helps Acrisure clients grow their safety cultures and manage risk with his executive, operational, and safety leadership. Fielkow has published several books and articles, including Leading People Safely: How to Win on the Business Battlefield, co-authored with James T. Schultz.