How One Claim Can Haunt Your Mod for Three Years
A single claim doesn't just hit your premium once. It rides three consecutive renewals, and the path from injury to drop-off runs about four to five years total.
NCCI's mod formula uses a three-year window of completed policy years. A claim from a given year sits in your mod calculation for three consecutive renewals after that policy reaches its valuation date. Counting from injury date to claim drop-off, a single claim affects your premium for roughly four to five years total.
An HVAC contractor in South Carolina had a $22,000 lost-time claim in March 2023. He paid attention to safety after it; no incidents since. Yet his mod went from 1.04 to 1.18 at the next renewal, climbed to 1.21 the year after that, and is still sitting at 1.16 two and a half years later. One claim, three premium hikes, no second incident.
This isn't bad luck or carrier vindictiveness. It is the experience period doing exactly what NCCI designed it to do. Understanding the window is how you make sense of mod movements that feel disconnected from your current operations.
What the experience period is
The NCCI (National Council on Compensation Insurance) mod formula uses a three-year window of completed policy years as its input. The mod for an upcoming policy looks at the three most recent policy years that have reached their valuation date, skipping the most recent one (which hasn't yet been valued).
For a 2026 policy year mod, NCCI typically uses claims data from policy years 2022, 2023, and 2024, valued at their respective valuation dates. The 2025 policy year hasn't been valued yet (its valuation date is mid-2026), so it doesn't appear in the calculation.
This rolling window is why a claim affects your mod for a defined period before aging out, not forever.
How long one claim stays on the mod
The timeline runs longer than most contractors expect. Consider an injury that happens early in a policy year, well before the year ends.
From that date, four to seven months pass before the policy year ends. Then 18 months from the policy effective date, the valuation snapshot freezes the claim's value for that policy year. Then three consecutive policy renewals after the valuation date have this policy year sitting in the active three-year experience window. Total elapsed time from injury to the claim dropping out of the mod calculation runs roughly four to five years, depending on when in the policy year the injury occurred.
That is why a claim from early 2023 is still affecting a contractor's 2026 mod, and may still appear in the 2027 mod calculation depending on policy renewal dates.
Why the formula was built this way
The three-year design isn't arbitrary. NCCI's actuaries built the window to balance two competing needs.
The formula needs enough data to produce a statistically meaningful mod. A single policy year of claim data, especially for smaller employers, has too much random variation to predict future losses reliably. Three years of data smooths out the noise.
The formula also needs to be reasonably current. Ten years of history would smooth too much and never reflect recent operational changes. Three years is a compromise; long enough to be statistically meaningful, short enough to respond when an employer's safety actually improves.
The consequence for contractors is that improvements take time to show up in the mod. A safety program implemented today affects the policy year it operates in, which then takes 18 months to reach valuation, and then sits in the experience window for three years after that. The full benefit takes about four years to materialize.
The compounding effect on small contractors
For smaller employers with limited payroll, the mod is more volatile because the formula gives less weight to industry-average expected losses and more weight to actual claim data. A single claim that wouldn't move a large contractor's mod by a fraction of a point can move a small contractor's mod by several points.
Combined with the three-year window, this is why a single bad year for a small construction contractor can mean five years of elevated premium. The claim hits hard, sits for three years, and the formula has limited statistical machinery to dampen the impact.
What stays correctable while the claim is in the window
While a claim is sitting in the experience period, the underlying data remains correctable. If the claim was miscoded as lost-time when it should have been medical-only, if subrogation recoveries weren't credited, if reserves were inflated and the claim has since closed at a lower amount, or if the classification code applied to the injured employee was wrong, those errors can be corrected and the mod recalculated for the affected policy years.
The practical answer: a claim in the experience period isn't frozen in stone. The valuation date freezes the snapshot, but corrected data can flow back and rerun the calculation.
What an audit would check
An audit asks four questions of every claim in the experience period: is the claim type (medical-only versus lost-time) correctly coded against the actual return-to-work facts; do the reserves on the worksheet reflect current claim status or stale numbers from years past; were third-party recoveries credited where they belong; and was the classification code applied to the injured employee correct for the work actually performed. These are the same questions a structured worksheet review runs through.
In our reviews of Southeast contractor worksheets, we find at least one yes answer on a meaningful share of claims, especially those that have been in the experience window for two or more renewals without revisitation.
A mod that reflects accurate data for every claim in the experience window doesn't lower the carrier's filed rate. It does ensure the multiplier the rate gets applied against reflects reality. Send us your NCCI worksheet and we'll review it for free.