Do you know what your Modification Factor will be Next Year?

GDI Insurance Agency can tell you today! We can also show you your trend and project where you are heading, and what to do about it. Just give us a call at 888-991-2929 and we will help you take control of your California Workmans Compensation Premiums!

Here is one way!

  • Understanding Your Workers’ Compensation Experience Modification Factor
    The key to calculating a 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 provides you with the information necessary to determine how to keep your workers’ compensation premium under control.
  • Who calculates the mod factor?
    Most states use the National Council on Compensation Insurance (NCCI) to collect data and calculate the experience modification factor. NCCI is a private corporation funded by member insurance companies. However, the following states have their own government-run rating bureaus that are separate from the NCCI: California, Delaware, Indiana, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, Texas and Wisconsin.
  • How is a mod calculated?
    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 take into account company size, unexpected large losses and the difference between loss frequency and loss severity to achieve a balance between fairness and accountability.
  • How does my mod affect my premiums?
    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 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 the losses are better than expected, resulting in a discounted premium.
  • What is the experience rating period?
    The mod is calculated using loss and payroll data for an experience rating period. The experience rating period typically includes data for three policy years, excluding the most recently completed year. For example, for a mod factor calculated on January 1, 2010, data would be used for the January 1, 2006-2007, January 1, 2007-2008 and January 1, 2008-2009 policy periods. The data for the January 1, 2009-2010 would be excluded.

Time period used in Workers’ Compensation Experience Rating

Experience Rating Period

Data Excluded

Rating Year






  • Claims Costs For Each Policy Period
  • Payroll data by state and class code

Mod Calculated

Mod Applied

Three years of data is used to provide a more accurate reflection of the losses, smoothing out the impact of any bad or good year of losses. The actual loss data is separated into primary and excess pools. Primary losses, which are the first $5,000 of every loss, measure frequency. Excess losses — or amounts more than $5,000 — measure severity. The formula penalizes loss frequency by including all loss amounts in the calculation. The reason for this is that these types of claims can be controlled through proactive loss control programs. Losses in excess of $5,000 are capped at levels that vary by state. This minimizes the impact that any single claim can have on your premium. In approved states, medical-only claims figures are reduced by 70 percent.

Expected losses are then calculated by using your payroll data by state and class code, and applying the Expected Loss Ratio (ELR). The ELR is provided by each state rating bureau. These figures are also broken down into expected primary losses and expected excess losses.

How do your losses compare?

The final mod calculation compares your actual primary and excess loss figures to those expected for a company of the same size and industry type. To understand how workers’ compensation losses to your business compare to state industry averages, contact GDI Insurance Agency to review your experience modification worksheet.

How can you control your mod?

Your mod factor has a direct impact on your workers’ compensation premium. The key to controlling your insurance costs is through accident prevention.

      1. The mod is calculated based on data reported to the rating bureau by past insurers. Incorrect or incomplete data can cause incorrect mod factors. Review the loss and payroll data to make sure the calculation is complete and accurate.
      2. Losses remain in the experience rating formula for three years. The experience modification factor is influenced more by small, frequent losses than by large, infrequent ones.
      3. Develop a sound safety program, return to work program and prevention procedures to reduce loss frequency.
      4. An effective self-inspection and accident investigation program are critical to managing claim frequency.
      5. Implement an active claims management program to manage outstanding reserves and focus on efficiently resolving open claims.
      6. Report all claims to your carrier immediately.
      7. Take an aggressive approach to providing light duty to all injured employees upon their release from treatment.
      8. Set safety performance goals for supervisory roles. Success in achieving safety goals should be used as one measure during performance appraisals.
      9. Train employees on their responsibilities for safety, and enforce conformance with these responsibilities.
      10. Frequently communicate with employees, on a formal and informal basis, regarding the importance of safety.

How can your experience rating save you money?

Establishing a proactive safety program is an effective way to reduce losses, which impacts your mod and workers’ compensation premium. Contact Grant Davis Today, 888-991-2929. We have the loss control experience to help you advance safety and control your workers’ compensation premium.

Here are 10 ways to control your California Workers Compensation Mod rate!

Your California Workers Compensation experience modification factor, or mod, is an important component used in calculating your workers’ compensation premium. If you can control your mod, you can control your price. GDI has gathered some of our top tips designed to positively impact your bottom line by reducing your mod rate!

    1. Investigate accidents immediately and thoroughly. Take corrective action to eliminate hazards. Be aware of fraud.
    2. Report all claims to carrier immediately. Alert carrier to any serious, potentially serious, or suspect claims. Frequently monitor the status of the claim and communicate with the adjuster to resolve as quickly as possible.
    3. Take an aggressive approach to providing light duty to all injured employees upon their release from treatment. Supervise light duty employees to assure their conformance with restrictions
    4. In serious cases that involve lost time, communicate with the claims adjuster so that they recognize your interest in returning the injured employee back to gainful employment.
    5. Set safety performance goals for persons with supervisory responsibility. Success in achieving safety goals should be used as one measure during performance appraisals.
    6. Develop a written safety program and train employees in their responsibilities for safety. Incorporate a disciplinary policy into the program, one that holds employees accountable for breaking the rules or rewards them for correctly following safety procedures.
    7. Frequently communicate with employees, on a formal and informal basis, regarding the importance of safety.
    8. Make safety a priority. Senior management must be visible in the safety effort and must support improvement.
    9. Evaluate accident history and near-misses at least monthly. Look for trends in experience and take corrective action on worst problems first, as soon as the problems manifest themselves.
    10. Hire us to ensure success! We have a proven track record. Look at the top of this page under contact us. Then click on Testimonials to see what our clients have to say about GDI Insurance Agency! Give us a call and ask them about us, then call us to get started! 1-888-991-2929