Ex-Mod 1.0 vs 1.25: What a Workers Comp Mod Really Costs You in 2026

By Winfield Lee, Licensed Independent Insurance Agent · Georgia License #230978 · Updated 2026

Short answer

Your experience modification factor multiplies your workers comp premium directly, so the difference between a 1.0 and a 1.25 mod is 25% more premium on the exact same payroll. On a business with $100,000 of manual premium, a 1.0 mod means you pay $100,000 and a 1.25 mod means you pay $125,000 — a $25,000 gap every single year. On a $250,000 manual-premium contractor, that same 0.25 spread is $62,500 a year. The mod compounds across every payroll dollar, which is why it is one of the highest-leverage numbers in your entire insurance program.

What the mod actually is

The experience modification factor — the "ex-mod" or "mod" — is a number the rating bureau assigns to compare your loss history against businesses of your size in your class codes. In most Southeast states that bureau is NCCI. A 1.0 means your losses are exactly average for a business like yours: no credit, no penalty. A 0.85 means you have run 15% better than expected and earn a discount. A 1.25 means you have run 25% worse than expected and pay a surcharge on top of the base rate.

Because the mod is a multiplier and not a flat fee, its dollar impact grows with your payroll. That is the part owners underestimate. A tenth of a point looks trivial on paper, but on a large book of payroll it is tens of thousands of dollars a year, renewal after renewal.

The 1.0 vs 1.25 gap in real dollars

Here is what the same 0.25 spread costs across different account sizes in 2026. "Manual premium" is your pre-mod premium — payroll times class-code rates before the mod is applied.

Now stretch the window. A contractor stuck at 1.25 for three years before working it back to 1.0 overpays roughly $75,000 on a $100,000 manual-premium account — enough to fund a full-time safety hire. That is the true cost of a bad mod: not one bad renewal, but three.

How the mod is calculated — and why frequency hurts most

The bureau looks at a rolling three-year experience period, excluding your most recent (current) policy year, and compares your actual losses to the expected losses for a business your size and class. The single most important thing owners get wrong: claim frequency is weighted more heavily than claim severity. The formula caps how much any one large claim counts (the "primary" versus "excess" loss split), but it fully counts the first dollars of every claim. Translation: five $3,000 claims usually damage your mod more than one $40,000 claim.

That is why a shop full of small, repeated strains, cuts, and slips can carry a worse mod than a competitor who had a single serious accident. It also tells you where to aim: preventing the little recurring claims and closing them fast does more for your mod than almost anything else.

Why the mod is bigger than your premium

A rising mod is not only a cost problem — it is a growth problem. Across the Southeast in 2026, general contractors, developers, and public owners routinely set a maximum experience mod as a bid prequalification, commonly 1.0 or 1.25. Cross that line and you are not just paying more; you are locked out of the job before you can submit a number. On GDOT, utility, school, and large commercial work, a mod above threshold can quietly cost you far more in lost revenue than in premium.

Five ways to drive a 1.25 back toward 1.0

1. Audit the mod worksheet for errors. Bureau worksheets contain mistakes — wrong class codes, open claims left at inflated reserves, or losses that should have been split differently. Correcting a single reserving error can move your mod a full point.
2. Attack frequency first. Because small claims count dollar-for-dollar in the primary layer, eliminating the recurring minor injuries is the fastest lever. Toolbox talks, housekeeping, and near-miss reporting pay for themselves.
3. Run a real return-to-work program. Getting an injured worker back on light duty converts a lost-time claim into a medical-only claim, and in most states medical-only claims are discounted before they enter the mod. This is the highest-ROI move available.
4. Manage claims and reserves actively. Open claims sit in your mod at their reserved value, not their final cost. Reviewing reserves quarterly and closing claims promptly keeps inflated estimates from dragging your mod up.
5. Report payroll and class codes accurately. Misclassified payroll inflates expected losses and distorts your mod in both directions. Clean, correctly split payroll gives you an honest — and usually lower — number.

For general information only. Not a quote or contract of insurance. Experience modification factors are calculated by the applicable rating bureau and subject to state rules and audit.