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Frequently Asked Questions about Workers Compensation Insurance

State laws mandate Workers Compensation Insurance.  The purpose of the Workers Compensation system is to provide financial and medical benefits to the victims of “work-related’ injuries and their families regardless of fault. 

How are Workers Comp premiums calculated?

The three basic factors involved in calcualting Workers Compensation premiums are:

  • Amount of payroll
  • Employee job classifications
  • A business's unique Experience Modification Factor (E-Mod)

Once job classification codes are determined for a business, every $100 of payroll per code is multiplied by a corresponding rate.  In most states, the rate assigned to a class code is determined by a governing entity, most commonly the National Council on Compensation Insurance (NCCI), not individual insurance companies.  Once payroll (per $100) is multiplied by a classification code rate, the product is multiplied again by your company's unique Experience Modification Factor (E-Mod).  An E-Mod is a numeric representation of your company's Workers Comp claim experience.

Payroll (per $100)   X   Classification Rate   X   E-Mod  =  Premium

How is an Experience Mod Calculated?

The process of calculating the Experience Modification Factor is complex, but the underlying theory and purpose of the formula is straightforward.  Your business's actual losses are compared to its expected losses by industry type.  The formula incorporates factors that account for company size, unexpected large losses, and the difference between loss frequency and loss severity.

How does and Experience Mod affect premiums?

The E-Mod represents either a credit or debit that is applied to your Workers Compensation premium.  An E-Mod factor greater than 1.0 represents a debit, meaning your actual losses are higher than your company's expected losses.  An E-Mod factor less than 1.0 represents a credit, meaning your actual losses are lower than your expected losses.

Workers Comp Solutions

Congratulations on taking the first step towards lowering your workers compensation costs by considering all of the issues raised in our questionnaire! If you would like to speak to our agents, please use our convenient form below and we will contact you, or call us at (608) 526-6345.


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