Also known as the "experience mod", an experience modifier is a numerical expression of a company's accident and injury record compared with the industry average. A rating of 1.0 means a company has an average safety record, while an experience mod of 0.80 means a company has a good safety record that could earn a 20% discount. An experience mod of 1.20 means a company's accident rate is higher than industry norm and raises the company's costs by 20%.
Your Experience Mod always uses three years of data, excluding the most recently completed year. For example, your 2017 Experience Mod would take into account 2013, 2014, and 2015. There are many variables that go into the calculation, including medical vs. indemnity claims, frequency, severity, etc. The formula used is calculated by the National Council on Compensation Insurance (NCCI), or, in the case of Commonwealth Contractors, it is promulgated by a third-party, using the NCCI formula.
For a detailed explanation, NCCI has published a very helpful document "The ABC's of Experience Rating."
The following sources provide information on workers' compensation insurance.