Frequency vs. Severity: Which Hits Your Work Comp Mod Harder?

When it comes to workers’ compensation costs, few topics spark more debate—and confusion—than the question:

Which is worse for my experience mod: many small injuries or one big one?

Employers, safety managers, and CFOs alike wrestle with this. It’s natural to assume a single large loss would always be the bigger problem. But that’s not necessarily true—especially for smaller employers.

Understanding the real impact of frequency versus severity on your experience modification factor (mod) is crucial if you want to keep your insurance premiums under control. Let’s break it down.

What Is the Experience Mod?

Your experience mod is essentially your company’s credit score for workers’ comp. It compares your actual workers’ compensation losses to the losses expected for similar businesses in your industry.

• A mod of 1.00 is average.

• A mod below 1.00 means you’re performing better than average and earn lower premiums.

• A mod above 1.00 signals worse-than-average performance and higher premiums.

It’s a measure of risk—the insurer’s way of predicting your future claims based on your past history.

The Split Point: Primary vs. Excess Losses

To understand frequency vs. severity, it’s important to know how losses are divided in the mod calculation:

• Primary losses are the first portion of any claim cost (for example, the first $17,000).

• Excess losses are any costs above that threshold.

This threshold—known as the split point—is currently $17,000 in most states. Why the split?

Because frequent smaller losses often reveal deeper safety or culture problems in an organization. One catastrophic accident might be a fluke, but frequent minor injuries usually aren’t.

As a result, primary losses are weighted much more heavily in the mod formula. Excess losses still count, but not as significantly.

Frequency Packs a Bigger Punch for Small Employers

Here’s why frequent small claims can sting:

Imagine a company has:

• Ten $15,000 claims:

  • Each claim counts fully as primary losses because they’re under the $17,000 split point.

  • Total primary losses: $150,000.

• One $150,000 claim:

  • Only $17,000 counts as primary losses.

  • The remaining $133,000 counts as excess losses, which are discounted in mod calculations.

So, ten smaller claims produce almost nine times more primary losses than one severe claim. For small employers, that can be devastating for the mod.

In general, particularly for smaller companies, having more losses—even smaller ones—signals a higher risk profile than having a single large loss.

But Severity Still Matters

That doesn’t mean large claims don’t hurt.

A severe claim:

• Increases your total incurred losses.

• Might still push your mod up, especially if you’re a smaller business.

• Can alarm underwriters, leading to higher premiums or non-renewal.

Plus, large claims may lead to higher loss development factors (LDFs) for self-insured employers, raising reserves and future costs.

However, for the mod itself, one large loss is usually less damaging than multiple small ones because of how excess losses are treated.

The Impact of Company Size

Another important factor is company size. The bigger the organization and the higher its premium, the less impact frequency and severity have on the mod calculation.

Large employers:

• Have higher expected losses (the denominator in mod calculation).

• Benefit from a higher weighting value, which smooths out the effect of individual claims.

So frequency and severity fluctuations don’t swing their mod as dramatically as they do for small businesses.

For a small business, even a few extra small claims can spike the mod significantly. That’s why proactive injury prevention and quick claims management are essential.

How to Control Frequency and Severity

Here’s how to keep both frequency and severity in check:

Focus on hazard elimination.
Prevent injuries before they happen. Good housekeeping, ergonomic assessments, and safety training go a long way.

Implement injury triage.
Nurse triage hotlines help determine which injuries need medical treatment versus simple first aid. Fewer unnecessary claims mean lower frequency.

Emphasize rapid return-to-work.
Avoid lost-time claims whenever possible. Keeping claims medical-only helps reduce primary losses.

Report claims promptly.
Delays in reporting can drive up costs and hurt your mod, especially if minor injuries worsen over time.

Analyze trends.
Look for patterns in small injuries. Are the same body parts or tasks involved repeatedly? That’s a red flag for frequency-driven mod increases.

The Bottom Line

So, which hurts your mod more—frequency or severity?

• For small employers, frequency is usually worse.
  Ten $15,000 claims wreak far more havoc than one $150,000 claim.

• For large employers, the effect is less dramatic.
  Their size and higher weighting value dilute the impact of both frequency and severity.

The best strategy? Aim for fewer injuries of any size. Focus on safety, return-to-work programs, and early reporting. Understand that small claims aren’t harmless. In workers’ comp, it’s often the little injuries that add up to the biggest costs.

Remember: your mod isn’t just a number—it’s a measure of your safety culture and a powerful driver of your insurance costs. Keep both frequency and severity low, and your mod—and your premiums—will thank you.

Michael Stack, CEO of Amaxx LLC, is an expert in workers’ compensation cost containment systems and provides education, training, and consulting to help employers reduce their workers’ compensation costs by 20% to 50%. He is co-author of the #1 selling comprehensive training guide “Your Ultimate Guide to Mastering Workers’ Comp Costs: Reduce Costs 20% to 50%.” Stack is the creator of Injury Management Results (IMR) software and founder of Amaxx Workers’ Comp Training Center. WC Mastery Training teaching injury management best practices such as return to work, communication, claims best practices, medical management, and working with vendors. IMR software simplifies the implementation of these best practices for employers and ties results to a Critical Metrics Dashboard.

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

Injury Management Results (IMR) Software: https://imrsoftware.com/

©2025 Amaxx LLC. All rights reserved under International Copyright Law.

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.