What is an Experience Modification Rate - ExMod?
The Experience Modification Rate (also called ExMod or EMR) is a number assigned by the state that compares your company's claims history to others in your industry. Insurance companies use this number to calculate your workers' comp premiums. The more claims you've had, the higher your ExMod—and the higher your premiums will be.
How does Experience Modification Rate work?
The NCCI (National Council on Compensation Insurance) takes all the claims your company has filed and compares them to similar businesses in your state. Based on this, they calculate your Experience Modification Rate.
If your company's claims history is better than average, then its Experience Modification Rate will be less than 1.0. If your company has had more or more severe accidents than average, your Experience Modification Rate will be greater than 1.0.
Insurance companies use this rate when calculating your premium costs. An ExMod below 1.0, say 0.78 or 0.85, lowers your premiums, while an ExMod above 1.0, like 1.3 or 1.5, raises your premiums.
From the Kickstand Files:
An event rental company approached us, struggling with high insurance premiums. After reviewing their policy, we found their ExMod to be 1.56, much higher than the industry average. This high ExMod had inflated their insurance costs by 56%, turning their base premium of $10,000, to a hefty $15,600.
We advised them that by implementing a safety program and keeping a clean claims record for 3 years, they could potentially reduce their ExMOd to around 0.70.
With this reduced ExMod, their annual workers' comp expenses could be slashed in half - from $15,600 to just $7,000!
How can I qualify for an experience modification rate?
To qualify for an experience modification rate, your company typically needs to have paid significant workers' compensation premiums for at least three years. Some businesses never meet this threshold.
During the first three years of your policy, it's important to maintain a strong safety record because once your ExMod kicks in, it will be based on your claims history from this period.
A solid safety record during this time can help ensure your ExMod starts at 1.0 or lower, keeping your premiums as low as possible.
How do I lower my experience modification rate?
Here are some steps you can take to lower your ExMod for your workers' compensation policy:
Implement Safety Programs:
Establish comprehensive safety protocols to prevent workplace accidents. Regularly conduct safety training, inspect equipment, and carry out emergency drills to lower the risk of injuries.
Focus on Loss Prevention
Review past incidents to identify patterns and implement corrective measures. This can involve upgrading equipment, improving work conditions, or adjusting operational procedures.
Create a Return-to-Work Program
Create a plan that supports the transition of injured employees back to work, whether through modified duties or reduced hours. This can help reduce the financial impact of claims, which will also have a positive effect on your ExMod.
Improve Hiring Processes
Enhance your hiring practices to include background checks and, if applicable, physical exams. This ensured new hires are fit for their roles and aware of safety expectations. Additionally, in nursing, staffing, and home health agencies, ensure that employees have the necessary certifications.
Opt for a Deductible Plan
Adding a deductible to your Workers’ Comp policy means your business will cover part of the claim cost. This can reduce the reported loss for each claim, as the insurance only pays above the deductible amount.
By doing this, your ExMod may not rise as steeply after a claim. Essentially, the deductible acts as a cushion, helping to manage and minimize the long-term impact of claims on your insurance expenses.
How long does it take for changes to affect the ExMod rate?
Since ExMod calculations are based on a three-year rolling average and don’t include the most recent policy year, the impact of an accident or injury—as well as improvements from reducing claims—won’t be visible immediately.
Kickstand Tip
Noticed an increase or decrease mid-policy? It could be your ExMod kicking in! Keep in mind, the effects of your ExMod aren't always tied to your renewal date.
Even if your policy anniversary differs from when you started the current plan, your ExMod may still take effect based on your original premium date. This means that if your business experienced prior losses or claims, your premium might adjust during the policy term, not just at renewal.
Experience Modification Rate FAQs:
What is the lowest experience modification rate possible?
This depends on the industry and state—every class code and region has its own minimum.
What is the highest experience modification possible?
The highest rate also varies by industry and location.
How can I find my experience modification rate?
You can usually locate your experience modification rate on the Declarations page of your workers' compensation insurance policy. If it's not listed there, your insurance agent can help you obtain the information.
What is the best experience modification rate in construction?
In the construction industry, an ExMod below 1.0 signifies better-than-average safety performance, whereas an ExMod of around 0.70 is often considered indicative of industry excellence.
Will my experience modification rate follow me if I switch to a new insurance carrier?
Yes, your experience modification rate will follow you whether you remain with your current insurance company or switch to a new one. Once a claim is filed, your ExMod adjusts, which can impact your premium with any insurance company. It's also important to note that your ExMod can affect other businesses you own.
Key Takeaways
Understanding experience modification can be overwhelming, especially at first. If you can focus on a safe workplace environment, it will be beneficial for you in the long run. It's more of an added benefit if you get to that point. It's good to know what it is, though.
Kickstand Insurance helps employers create a safe work environment in an effort to lower their Experience Modification. Other than the tips above, we encourage regular safety meetings for employees as well. Doing everything you can to keep your employees safe is key to lowering your ExMod and insurance premium.
Do you have any questions about your ExMod and how you can lower it? We’re happy to help. You can either start an instant quote on our site so we have all the information about your policy to help you or or you can call us directly at 866-338-8823.
Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.
An injury or illness in your workplace affects your business in so many ways. There’s the absence of a team member, the potential loss of morale, and a possible dent in your company’s reputation.
