What is an experience modification factor?

If you write workers compensation, you'll encounter the experience modification factor — often called the X-mod or EMR — on almost every mid-size commercial account. Understanding how it works helps you explain premium changes to clients and catch errors that could be costing them money.

What is the experience modification factor?

The experience modification factor is a number calculated by the National Council on Compensation Insurance (NCCI) — or by a state rating bureau in some states — that compares a company's actual workers comp claims to what's expected for a business of that type and size.

A mod of 1.0 means the business is exactly average. A mod below 1.0 means fewer claims than expected — and a premium discount. A mod above 1.0 means more claims than expected — and a premium surcharge.

How is the X-mod calculated?

The X-mod uses 3 years of claims data, excluding the most recent policy year. So a mod calculated in 2025 uses data from 2021, 2022, and 2023.

The calculation compares:

• Actual losses — what the business actually cost the carrier in claims
• Expected losses — what NCCI would expect a business of that size and industry to cost

The formula also splits losses into "primary" (the first portion of each claim, weighted more heavily) and "excess" (everything above the primary threshold). Frequent small claims hurt the mod more than a single large claim — which is an important point to explain to clients.

When does the X-mod apply?

Not every business qualifies for experience rating. To be eligible, a company generally needs to generate enough workers comp premium to make statistical analysis meaningful — typically $5,000–$10,000 in annual premium, depending on the state.

Smaller businesses are assigned a "manual" rate based purely on their class code and payroll, with no X-mod applied.

What agents need to include in submissions

When submitting a workers comp application for a business with an X-mod, include:

• The current X-mod number and the state it was issued in
• The NCCI or state bureau experience rating worksheet (if available)
• An explanation for any mod above 1.10 — underwriters will ask

X-mod errors are common — and costly

Mods are calculated using payroll and claims data submitted by prior carriers. Errors in that data — misclassified payroll, claims that should have been excluded, or units assigned to the wrong entity — can result in an inflated mod.

Some agents and consultants specialize in X-mod audits. If a client's mod seems high relative to their claims history, it's worth requesting the rating worksheet from NCCI and reviewing it line by line. Correcting errors can result in significant premium refunds.

How to explain the X-mod to clients

Most clients don't understand why their workers comp premium went up 30% when they "barely had any claims." A simple explanation:

"Your mod is basically your safety score. A 1.0 means you're average for your industry. If your score is above 1.0, carriers charge more because your history suggests higher-than-normal risk. The good news is it's based on a rolling 3-year window — so improving safety practices now will start lowering your mod within a year or two."

Capture X-mod and payroll data automatically

AgencyAssist collects experience mod, payroll by class code, and prior carrier information as part of your client intake — no phone calls needed.