What it means
An experience modification rate compares a business’s actual workers compensation losses with the losses expected for businesses of its size and type. A rate of 1.00 is average. A rate below 1.00 lowers premium, and a rate above 1.00 raises it.
In California, the Workers’ Compensation Insurance Rating Bureau of California, known as the WCIRB, calculates experience modifications for eligible employers. Many other states use NCCI. The calculation generally uses several years of payroll and claims data, excluding the most recent year.
Contractors often report the rate on prequalification forms, because many owners and general contractors use it to screen bidders. Managing claims and returning injured workers to modified duty can improve it over time.
An example
Delta Ridge Framing receives a 1.25 experience modification after two serious injuries. Its standard workers compensation premium of 80,000 becomes 100,000 before other adjustments, and a hospital project now asks for an explanation in its prequalification packet.
Names in this example are fictional.
See this term in your own contract.
Send a lease, subcontract or client agreement with the policies you hold. You get every insurance requirement in it, cited to the clause, set against what your policies say. Free, and back within one business day.
Get a free contract checkExperience modification rate, answered
What is a good experience modification rate?
Anything below 1.00 means losses were better than expected for similar businesses, which lowers premium. Some owners and general contractors set maximum acceptable rates for bidders, often around 1.00 or slightly higher. Requirements vary by project, so check the prequalification criteria before bidding and plan claims management with that threshold in mind.
Can a small business have an experience modification?
Only if it meets the rating bureau’s eligibility threshold, which is based on premium size and can change from year to year. Smaller businesses below the threshold are not experience rated and pay unmodified rates. In California the WCIRB publishes the current threshold, so check it before assuming a mod applies.
General information only. It is not legal or insurance advice. Only issued policy documents and endorsements describe actual coverage.