How Workers’ Comp Experience Mods Affect Your Premium in Tennessee

For businesses in Knoxville and across Tennessee, your experience mod is one of the biggest factors in what you pay for workers’ compensation. Here’s how it works and how it affects your premium and, ultimately, your bottom line.

What is an experience mod?

An experience modification, or “X-Mod,” adjusts your workers’ compensation premium based on your business’s own claims history compared with other businesses in your industry. In Tennessee, experience mods are calculated by the National Council on Compensation Insurance (NCCI), and every carrier uses the mod NCCI issues. Businesses generally qualify for a mod once their premium is above a minimum threshold.

How does it affect what I pay?

A mod of 1.00 means your business is average for your industry. Below 1.00 means you pay less, and above 1.00 means you pay more. For example:

• A mod of 0.80 means you pay about 20% less than the average business in your class.
• A mod of 1.50 means you pay about 50% more than an average business in your class.

For a contractor, manufacturer, or trucking company with a large payroll, that difference can easily mean tens of thousands of dollars a year.

What goes into the calculation?

NCCI looks at your payroll and claims over a three-year experience period, generally the three policy years ending one year before your mod takes effect. It factors in:

• The number of claims your business has had. A lot of small claims can hurt your mod more than one large claim, so frequency matters!
• The severity of those claims, measured by what was paid and reserved.
• Your industry classification and payroll size.
• How your results compare to what’s expected for businesses like yours.

How can I lower my mod?

1. Keep a strong safety program. Follow Tennessee OSHA (TOSHA) requirements and make safety training, inspections, and accountability part of everyday work.
2. Report injuries right away. Claims reported late tend to cost more.
3. Bring injured workers back with modified duty. A good return-to-work program can keep a claim from turning into lost-time costs.
4. Review your claims and payroll for errors. Mistakes in claim reserves, payroll, or classifications can raise your mod. Review your worksheet each year and correct errors quickly.
5. Work with an independent agent who knows workers’ comp. We can shop your policy with multiple carriers, review your mod worksheet, and help you build a loss prevention plan.

By understanding your experience mod and taking steps to improve it, you can lower your workers’ compensation premiums and protect your business in case of an on-the-job injury.