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Member, Beacon International Group, Ltd.
A workers compensation experience modification factor is a component of the formula used to adjust a manually rated premium for the difference between a particular organization's “inherent risk and the average risk for all companies with payrolls in the same class codes,” according to Willis North America Inc.
To determine an employer's premium, state-approved rates for employee class codes are multiplied by the employer's exposure, measured by payroll. That then is modified by the ex-mod.
An employer with a credit mod of 0.75, for example, would benefit from a premium based, essentially, on 75% of its prevailing rates. However, an employer with a 1.25 debit mod would pay a premium based on 125% of the prevailing rates.