Experience mod
Your safety score. 1.0 is average. Under 1.0, you're beating the field and somebody owes you. Over 1.0, you're paying extra and probably know why.
Learn
Insurance words, translated. I've read the policy so you don't have to. You should still read yours.
Start here
Insurance words, translated
Loss runs
Your claims history. Your agent can email it in a day. If they say it takes longer, ask again. Nicely. Then less nicely.
Guaranteed cost vs. a captive
Guaranteed cost means the price is guaranteed. Your money leaving is also guaranteed. A captive means you keep what you don't spend, and eat what you do.
Underwriting profit
The money left in the bucket at the end of the year. In the regular market, that's the insurance company's bonus. In a captive, it's yours. So is the bill when the bucket runs dry.
Collateral
The deposit. Yes, there's a deposit. No, I'm not going to pretend there isn't.
Adverse selection
If the only people who show up to the potluck are the ones who burn everything, the potluck's going to be bad. That's why we ask about your claims.
Risk distribution and critical mass
You can't have a huddle with two guys. That's a conversation. We need enough crews for the math to work.
Nuclear verdicts
A jury decides a fender-bender is worth more than your whole company. Happens more than it should. It's why your auto bill looks like that.
Texas non-subscription
In Texas you can opt out of workers comp entirely. Some do. It's a real option with real tradeoffs, and I'll explain both sides, because I'm not the one who has to live with it.
Surety bond
A promise with a cosigner. Not insurance. People mix them up. I used to.
Total cost of risk
Everything the risk costs you, not just the premium. The deductible, the downtime, the guy on light duty, the four hours you spent on hold. Add it up. Then get mad.
Captive manager
The people who actually run the insurance company you'd own. We're not them. We're the ones who help you find enough friends to need them.
Your safety score (the experience mod)
The one number that moves your workers comp bill the most, and the one most owners have never seen the math behind.
What the number means
A mod of 1.00 is average. Lower than 1.00 is a credit that cuts your workers comp premium; higher is a debit that raises it. For example, on $50,000 of premium, a 0.80 mod makes it about $40,000 and a 1.20 mod makes it about $60,000.1
1.0 means average. Under it, you're beating the field. Over it, you're paying extra, and you probably know why.
What it measures
It compares your own payroll and claims with the average employer in your same job classification.1
It's your claims versus what crews like yours usually have.
How far back it looks
Usually the latest three years of your data. Each new year adds your newest policy and drops the oldest, and a mod usually applies for one year.1
It's a three-year memory. Good years and bad ones roll through slowly.
Why small claims add up
Each claim is split at a dollar amount called the split point. The part under it counts more than the part over it, so the formula weighs how often you have claims more than how big they are. One $50,000 claim hurts less than ten claims adding up to $50,000. Since 2024 the split point is set state by state and updated every year.12
Lots of small claims hurt you more than one big one. Frequency is the killer.
Medical-only claims
In most states, a claim with only medical costs (no lost time) counts at 30% of its value, a 70% reduction. That’s meant to remove the reason to pay small claims out of pocket instead of reporting them.1
Report the small ones. Medical-only claims count at 30%, so there’s no reason to hide them.
What moves it
A safe workplace with real safety programs puts you in a better position for a credit. The formula rewards fewer claims and getting injured workers back to work as soon as reasonably possible.1
Fewer claims, and people back to work sooner. That’s the whole playbook.
In Texas
Texas uses NCCI’s rating plan, with Texas exceptions, for mods effective on or after July 1, 2015. It replaced the old Texas-only plan.3
Texas plays by the same rulebook as most of the country now. Mostly.
Where to find yours
Look on your workers comp renewal paperwork, or ask your agent for your experience rating worksheet. It shows your mod and the claims and payroll behind it.1
It's on page two of the thing you didn't read.
Hank's Rules of the Jobsite
Rule 1: If it's wet, it's not done.
Rule 2: Read the thing before you sign the thing.
Rule 3: Your safety record is money. Find out who's holding it.
Rule 4: Never trust a number you can't see the math on.
Rule 5: Ballpark beats blank.
Rule 6: Don't count umbrella or excess.
Rule 7: Nobody gets a dividend for being brave. You get one for being boring.
Rule 8: A captive is a long game. If you need a quick fix, that's a different aisle.
Rule 9: If the explanation takes forty minutes, somebody's hiding something. Or they're a lawyer. Sometimes both.
Rule 10: You're not overpaying alone.
I'm not licensed to tell you what to buy. I'm licensed to hold a clipboard. Talk to a licensed pro before you sign anything.