What is the Experience Modification (XMOD) factor?
The X-MOD is calculated from loss information that insurance companies are required to submit to the WCIRB on an annual basis. The WCIRB calculates an XMOD for each employer — provided the business meets a required premium threshold to qualify for an X-MOD. The formula takes into account reported paid losses, claim loss reserves and payroll amounts. It uses data of the past three years, but the most recently completed policy year is excluded. For example, an X-MOD effective in 2007 would use policy data from the policies effective in 2003, 2004 and 2005. The data from the 2006 policy would not be used until the 2008 X-MOD, when the data from 2003 would drop off. Why is the topic of Experience Modification often overlooked by business owners and how does X-MOD affect businesses’ workers’ compensation premium? While employers commonly realize that a lower X-MOD is somehow a good thing, many don’t make the connection between this number and their premium costs. Let me illustrate the treme
