What is an 'experience modification factor' (mod) in workers compensation?

The experience modification factor (commonly called 'experience mod' or just 'mod') is a numerical multiplier applied to the standard premium for a workers comp policy. It compares the employer's actual claims experience to expected claims for businesses in the same classification. A mod of 1.0 is average; above 1.0 increases premium; below 1.0 decreases premium. The mod is calculated by the National Council on Compensation Insurance (NCCI) in most states based on three years of historical claims data (excluding the most recent year). Frequent or severe claims push the mod up; clean experience brings it down. The mod can have a significant financial impact — a mod of 1.5 means 50% higher premium than average; 0.7 means 30% lower. Some industries treat mod as a competitive metric and require contractors to have mods below certain thresholds to bid on jobs.