Workers’ Compensation Insurance

Workers' Compensation Insurance

Workers' compensation insurance is one of those subjects almost guaranteed to make a business owner's blood pressure rise. It is usually the policy that costs them the most money and the one that is least understood as to how the premiums are derived.

Many employers mistakenly believe that the state sets the rates for workers comp and that all carriers charge the same rate for the same class code. It is true that the states play a role in setting workers comp rates, however each company uses their own experience with particular classes of business to apply various multipliers which result in the final rate. Then, qualifying companies also have an additional factor applied called the Experience Modification Factor (commonly referred to as your "experience mod").

An Experience Mod is a factor that is determined by the National Council on Compensation Insurance (NCCI). NCCI oversees workers' compensation rules in most states. They determine a business' Experience Mod by determining an expected number and dollar amount of losses for each industry and job and then comparing the business with this standard. If your business has more losses than expected, then your Experience mod will be greater than 1.00 which is a Debit Mod and translates into higher premiums for you. If your losses are lower than expected, then your Exp Mod will be a Credit Mod and will translate into lower premiums for you.

This year is a particularly interesting one in the workers comp world due to the changes that have been made in how NCCI calculates the Experience Mod. Due to increasing medical costs, NCCI changed the formula they use to calculate your Experience Mod for the first time in 20 years. The formula will change again next year also so if you've never paid attention to this part of your insurance before, now would be a good time to do so.

For more information on how to control your Workers' Compensation, give us a call at 877-352-2121 or email us at

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