What is an Experience Modification Factor (aka X-Mod) for Worker's Compensation Insurance?

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In California, the Experience Modification Factor (X-Mod) is a numerical rating used to adjust an employer's workers' compensation insurance premium. The X-Mod is based on the employer's claim history and is intended to reflect the level of risk associated with the employer's business.

The X-Mod compares an employer's actual losses (in terms of claims paid and reserves set) to the expected losses for businesses of similar size in the same industry. If an employer's losses are higher than expected, their X-Mod will be greater than 1.0, indicating a higher risk and a higher workers' compensation insurance premium. If an employer's losses are lower than expected, their X-Mod will be less than 1.0, indicating a lower risk and a lower workers' compensation insurance premium.

The X-Mod is calculated by the Workers' Compensation Insurance Rating Bureau of California (WCIRB) and is based on a three-year experience period, excluding the most recent policy year. The X-Mod is typically updated annually and is based on data reported to the WCIRB by the employer's insurance carrier.

Employers can use their X-Mod as a benchmark for their workers' compensation performance, and can take steps to reduce their X-Mod by implementing safety programs and best practices to reduce workplace injuries and claims. By doing so, employers can reduce their workers' compensation insurance costs over time.

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Here is some info from the WCIRB's website that explains a bit more:

California's Experience Rating System

California's workers' compensation experience rating system is a merit rating system intended to provide employers a direct financial incentive to reduce work-related accidents. The experience rating system objectively distributes the cost of workers' compensation insurance more equitably among employers assigned to particular industry classifications.

An experience modification, which is expressed as a percentage, compares the loss or claims history of one company to all other companies in the same industry that are similar in size. Generally, an experience modification of less than 100 percent reflects better-than-average experience, while an experience modification of more than 100 percent reflects worse-than-average experience. Accordingly, an experience modification that is greater than 100 percent usually increases the cost of an employer's workers' compensation insurance premiums, while an experience modification that is less than 100 percent usually decreases the cost of an employer's workers' compensation insurance premiums.

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