What's an e-mod? Experience modification explained

‍Quick summary:

• An experience modification factor, or e-mod, adjusts your workers’ comp premium up or down based on your claims history compared to similar businesses.
• A rating below 1.0 lowers your premium; above 1.0 raises it.
• The rating is based on a three-year look-back period, not your most recent policy year.
• Frequency of claims matters more to your rating than the severity of any single claim.

Here’s how it actually works, who calculates it, and what you can do about yours.

What is an experience modification factor?

Your e-mod is a multiplier applied to your workers’ comp premium before other adjustments are made. Think of it as a report card for your claims history, measured against other businesses that do similar work.

• E-mod below 1.0: your losses have run lighter than the industry average, so you get a credit that lowers your premium.
• E-mod above 1.0: your losses have run heavier than average, so you get a debit that raises your premium.

Your e-mod is tied to your business entity, not your current policy or carrier. If you switch insurers or even change locations, your e-mod comes with you. It only resets if the business is sold or reorganized under entirely new, unrelated ownership.

Who calculates e-mods?

In most states, it’s the National Council on Compensation Insurance. NCCI collects claims data across the industry, sets rates by class code, and calculates experience modification factors the same way for every employer in a state, no matter which carrier writes the policy. 

A handful of states, including California and New York, run their own independent rating bureau instead, but they operate similarly. Wherever you do business, if NCCI or your state’s bureau calculates your e-mod, your carrier must apply it. 

Who qualifies for an e-mod?

Every employer whose premium clears a minimum threshold set by the rating bureau gets an experience rating. That threshold changes annually and varies by state. If your premium falls under it, you pay the standard rate for your class code, with no e-mod adjustment either way.

Not sure where your business stands? Get a quote, and we’ll show you exactly where you land.

What time period does an e-mod cover?

An e-mod is based on a three-year claims period. The most recent year isn’t included because those claims haven’t fully played out yet, and the final costs aren’t known. So your rating is really built on the three years before that.

How is an e-mod actually calculated?

E-Mod = Actual Losses ÷ Expected Losses

The formula compares your actual claims losses to what the rating bureau expected for a business of your size in your industry over the same period. Payroll matters here, since a bigger business with more payroll is expected to have more claims than a smaller one. Businesses only get compared against others of similar size and industry. An accounting firm gets measured against other accounting firms, not against a construction crew or a retail shop.

One thing that trips people up: the formula weighs how often claims happen more heavily than how expensive they are. A single big claim tends to be a one-off, but a pattern of frequent claims says more about how your business is actually running day to day. That’s why frequency carries more weight than severity.

What doesn’t count toward your e-mod?

Some claims are left out of the calculation entirely:

• Denied or non-compensable claims
• Claims with zero medical or indemnity cost
• Confirmed fraudulent claims

If your policy carries a deductible, that amount typically gets subtracted from the claim cost before it’s used in the calculation, which is one reason a deductible can work in your favor over time.

There’s also a per-claim cap, sometimes called a state accident limitation. It caps how much of any single large loss gets counted in your experience period. The logic is that one catastrophic claim doesn’t necessarily predict your future risk the way a pattern of smaller claims does, so the formula limits how much one bad incident can skew your rating. Each state sets the cap amount and can change it year to year.

How do I keep my e-mod low?

A few things actually move the needle:

• Run a real safety program. Not a binder on a shelf, but active prevention that matches the work your team does.
• Build a return-to-work plan. Getting injured employees back on the job safely and sooner keeps claims costs and your rating down.
• Stay on top of claims early. Fast reporting and effective claims management prevent small incidents from becoming expensive ones.
• Consider a deductible. In states where claims are calculated net of deductible, this can help your rating over time.

See it in action

Two companies in the same industry, with the same headcount, end up with very different outcomes.

Business A has a strong safety program and a clean claims history, which earns it an e-mod of 0.85. That's a 15% discount, so for every dollar of coverage, it pays 85 cents.

Business B has a weaker safety program and frequent claims, which pushes its e-mod to 1.25. That's a 25% surcharge, so for every dollar of coverage, it pays $1.25.

Both companies work in the same trade and are the same size, yet there's a 40-point swing in what they pay, driven almost entirely by how each one manages risk and claims.

Why this matters beyond your premium

A high e-mod doesn’t just cost you money. It can shut doors. Some general contractors and government contracts set a maximum e-mod, often 1.0, as a bidding requirement. Staying under 1.0 isn’t just about savings; it can be the difference between qualifying for a job and getting passed over before you even submit a bid.

The bottom line

Your e-mod isn’t just a number on a renewal notice. It’s a direct reflection of how your safety and claims practices are performing relative to your peers, and understanding it is the first step toward actually lowering it.

At EverPeak, we offer competitive rates starting at $18 a month, and we have the resources to help you keep your e-mod low. Get a quote and see what hardworking coverage costs for your business.