The National Council on Compensation Insurance (NCCI) calculates a contractor’s experience modification rate 60 to 90 days before the workers compensation policy renews, generally from three years of payroll and claims. It sends the result to the insurer, and in some states to the employer. The mod is one factor, printed to two decimals, that multiplies the manual premium.
NCCI’s guide, the ABCs of Experience Rating, calls a mod below 1.00 a credit and a mod above 1.00 a debit. Owners read the same number on prequalification forms, so it affects bid eligibility as well as premium.
Where the mod shows up
In NCCI’s example, a $100,000 premium becomes $75,000 at a 0.75 mod and $125,000 at 1.25.
Owners also use the mod to screen bidders. The Judicial Council of California required general contractors to prequalify before bidding a tenant improvement project for the Supreme Court and the First District Court of Appeal, with questionnaires due November 21, 2025. Question 4 asks whether the firm’s mod exceeded 1.0 at any time in the past five premium years. A “no” earns 10 points, a mod no higher than 1.5 earns 5, and anything above 1.5 earns 0.
What goes into the worksheet
NCCI’s guide walks through the worksheet in the order the data arrives:
- The insurer files a unit statistical report with NCCI for each policy. It has 18 months from the policy’s start date to file it.
- The experience period is generally three policy years. For a January 1, 2026 rating effective date, NCCI uses the policies that began January 1 of 2022, 2023 and 2024. The 2025 policy is left out because its losses are not yet valued.
- Expected losses come from payroll. For each class code, the expected loss rate is multiplied by payroll divided by 100. A discount ratio (D-ratio) then splits expected losses into an expected primary part and an expected excess part.
- Actual losses are each claim’s incurred amount, with indemnity and medical combined. The worksheet marks each claim open or final.
- A split point divides every claim. The dollars up to the split point are primary losses, which NCCI says measure frequency. The dollars above it are excess losses, which measure severity. A state accident limitation caps each claim.
- Medical-only claims enter at 30% of their value in states that approved NCCI’s Experience Rating Adjustment, which NCCI says most have.
NCCI’s guide uses an $18,500 split point, the countrywide value before a methodology update that took effect for most states on January 1, 2024. Since then each state has its own split point, indexed with its annual rate or loss cost filing. NCCI’s FAQ gives $15,000 and $25,000 as possible values for a low-severity and a high-severity state.
Put together from the summary page of NCCI’s sample worksheet, the calculation is:
Mod = (actual primary + W × actual excess + (1 - W) × expected excess + ballast) ÷ (expected losses + ballast)
W is the weight given to excess losses. It is a measure of credibility, meaning how much weight the formula gives a firm’s own record compared with the class average, and NCCI says it is small for small employers and grows with size. Ballast is an amount added to both sides to limit the effect of any single loss, and it rises as expected losses rise. On NCCI’s sample worksheet, adjusted actual losses of $243,120 divided by adjusted expected losses of $242,971 give a mod of 1.00.
A worked example
The figures below are an example with round numbers, built on NCCI’s formula. A concrete contractor has $200,000 of expected losses over three years. The D-ratio is 0.40, so expected primary losses are $80,000 and expected excess losses are $120,000. W is 0.15, ballast is $45,000, and the state’s split point is $20,000.
The denominator is $80,000 plus $120,000 plus $45,000, or $245,000. Every scenario also carries the same stabilizing value in its numerator: $120,000 × 0.85 + $45,000 = $147,000.
| Claims in the experience period | Total incurred losses | Primary losses in formula | Excess losses in formula | Mod | Modified premium |
|---|---|---|---|---|---|
| No claims | $0 | $0 | $0 | 0.60 | $300,000 |
| One $100,000 lost-time claim | $100,000 | $20,000 | $80,000 | 0.73 | $365,000 |
| Ten $10,000 lost-time claims | $100,000 | $100,000 | $0 | 1.01 | $505,000 |
| Ten $10,000 medical-only claims | $100,000 | $30,000 | $0 | 0.72 | $360,000 |
The single $100,000 claim puts $20,000 into primary losses and $80,000 into excess. W cuts the excess to $12,000, so the numerator is $179,000 and the mod is 0.73.
Ten $10,000 claims add up to the same $100,000. Each one sits under the split point, so all of it enters as primary losses at full weight. The numerator is $247,000 and the mod is 1.01, which would have cost 5 of the 10 points on the Judicial Council form.
If those ten claims stayed medical-only, the adjustment counts $30,000 of them, and the mod drops to 0.72. NCCI says the adjustment reduces the incentive for employers to pay medical-only claims without reporting them to the insurer.
On a $500,000 manual premium, the gap between 0.73 and 1.01 is $140,000 for the year. If the rest of the record held steady, a similar gap would recur on each of the three mods that include that policy year.
What moves the mod
NCCI says primary losses have a greater impact on the mod than excess losses, so the number of claims under the split point matters more than the size of any one claim. Read the 300 log alongside the loss run. The TRIR and DART rates count many of the same injuries from the safety side.
Open claims enter at their incurred amount as the insurer reported it. Pull the loss run before NCCI calculates the mod and ask the adjuster about any open claim whose amount looks high for the injury.
Expected losses rise and fall with payroll in each class code. Less payroll, or payroll moved into a class with a lower expected loss rate, shrinks expected losses, and the same claims then produce a higher mod.
NCCI combines the experience of entities with more than 50% common majority ownership into one mod. After an ownership change the employer has 90 days to notify the insurer in writing, and NCCI may revise the current mod and up to two before it.
NCCI issues each mod as preliminary, final or contingent, and revises a contingent mod once audited payroll or loss data arrives. When a prequalification form asks for the current mod, note its status beside the number.
NCCI says 39 jurisdictions have approved its plan. Indiana, Massachusetts and North Carolina apply it through their own rating organizations, which produce the intrastate mods there. Pennsylvania does not participate, and its own bureau develops a Pennsylvania mod. Check which organization issued yours before rebuilding it.
How to start on your jobs
Get the full experience rating worksheet behind this year’s mod from your insurer or from NCCI’s Riskworkstation site. Copy the expected losses, D-ratio, W, ballast and split point into a spreadsheet, and confirm that your formula reproduces the published mod to two decimals.
Then add each new claim from the loss run to the policy year it belongs to, and recompute the mod that year will feed. Track the count of claims under the split point each quarter, next to the TRIR from the 300 log, so the estimating team knows the number that will go on the next prequalification form before the next worksheet arrives.