An X-Mod, also known as the experience modification factor, experience mod, and EMR, is the number that represents a company’s likelihood to have future injuries. It considers the company size and industry. In other words, it is your company’s safety score regarding your workers’ compensation insurance coverage.
Expected Losses and Actual Losses
The X-Mod compares expected losses and actual losses. Expected losses are determined by the company’s class codes and payroll, while actual losses are determined by the company’s actual number of claims. Understanding your company’s X-Mod can help you to lower your insurance premium.
The X-Mod
Your x-mod is represented in numbers:
- 1.00: If a company has as many actual losses as expected losses, the X-Mod would be 1 (the average X-Mod).
- 1.01 and above: If a company has more actual losses than expected losses, their X-Mod goes up. The farther their actual losses are from the expected losses, the higher up it goes. An X-Mod above 1.0 means your claims history is worse than the industry average for workers’ comp.
- 0.99 and below: A company’s X mod will decrease if their actual losses are lower than expected losses. An X Mod below 1.0 means it is better than the industry average.
X-Mod Calculation
Your X-Mod is based on a 3-year period. The insurance companies take the last three years into account to compare actual losses. For example, let’s say your policy runs from March 2022/2023. The 3 years that will be considered are March 2018 – March 2021.
To calculate the experience modification, you must compare the actual losses of the company to the expected losses of that same company. Actual losses are the medical costs and the indemnity costs resulting from a work-related injury or claim that your insurance company has paid or will pay in the future. Expected losses are a representation of the average losses of companies of similar size and within the same industry, measured by their classifications and payroll.
The larger a company’s payroll the more losses the business is expected to incur. Larger businesses and those businesses that are considered higher risk also have a larger variance in potential X-Mod.
How Does Your Experience Mod Effect Premium?
The X-Mod is part of the workers compensation standard premium equation. The higher your mod, the more you will pay in premium. That equation is Workers’ Classification Code Rate X Experience Modification Number X (Payroll/$100) = Premium. Here is an example:
Scenario 1 – higher mod
The rate is determined by state – but let’s say in this case it is $1.
Your Payroll is $500,000
The X-Mod is 1.5
Your premium = $1 x 1.5 x 5,000 = $7,500
Scenario 2 – lower mod
The rate is determined by state – but let’s say in this case it is $1.
Your Payroll is $500,000
The X-Mod is .80
Your premium = $1 x .80 x 5,000 = $4,000
How To Impact Your X-Mod?
This could be a whole blog, but here are a few tips:
- Encourages the development of loss prevention and safety programs.
- Implement a Return-to-Work Program
- Prioritize occupational health and safety in their workplace and prevent accidents and injuries.
- Work with a Worker Comp professional that will give you tools & guidance to strengthen your program
Reducing a company’s X-Mod may take some time but the results will be a safer workplace and a discount on your workers’ compensation insurance premium. Working with a workers comp professional is key. At Mod Advisor, we work with agencies to make workers comp easier. If you are an agency or business wanting to improve your work comp program, reach out at [email protected].