Your premium is not primarily determined by your revenue, your payroll, or the number of trucks you run. It's determined by your claims history. A contractor with $5 million in revenue and zero claims in three years will pay half what a contractor with $2 million in revenue and three claims pays. The claims history — captured in your loss runs and distilled into your experience modification rate — is the most powerful pricing input in commercial insurance.
Underwriters are not looking at whether you've had claims. Everyone has claims eventually. They're looking at frequency, severity, what the claims were for, whether they indicate a pattern, and whether you've done anything to prevent recurrence. A single large claim is less concerning than three small ones. A slip-and-fall at a client site is less concerning than three workers injured in the same type of accident. The story your claims tell matters as much as the dollar amounts.
This guide covers how claims history affects your premium, what underwriters see when they review your loss runs, how the experience modification rate works, when claims fall off your record, and what to do after a bad year.
What Loss Runs Are and Why They Matter
A loss run is a carrier-generated report listing every claim filed against your policy during a specified period. It includes the date of loss, the type of claim, the claimant, a description of what happened, how much has been paid to date, how much is reserved (the carrier's estimate of future payments), and the current status (open, closed with payment, closed without payment).
Loss runs are not optional documents. When you apply for coverage with a new carrier or renew with your existing carrier, the underwriter will request loss runs for the past three to five years. If you're switching carriers, your new carrier will request them directly from your old carrier. If you're renewing, your current carrier already has them. Either way, the underwriter is reading your loss runs before quoting your premium.
How to request your loss runs
You are entitled to your loss runs at any time. Call your current carrier or your broker and request loss runs for the past five years. Most carriers can generate them within 24 to 48 hours. Some states require carriers to provide loss runs within a specified timeframe when requested by the policyholder. If you're shopping for coverage or preparing for renewal, request your loss runs early so you know what the underwriter will see.
What's on a loss run
- Date of loss: When the incident occurred, not when it was reported. This date determines whether the claim falls within the policy period and when it ages off your record.
- Claimant: Who filed the claim — an employee (workers' comp), a customer or third party (GL), a vehicle accident counterparty (auto).
- Description of loss: A brief narrative describing what happened. This is what underwriters read to assess whether the claim reflects systemic risk or was a one-off incident.
- Paid: How much the carrier has paid to date in medical costs, settlements, legal defense, or property damage.
- Reserved: The carrier's estimate of what they expect to pay in the future. High reserves signal that the claim is not resolved and could grow.
- Incurred: Paid plus reserved. This is the total exposure the carrier sees from the claim.
- Status: Open, closed with payment, or closed without payment. Open claims remain on your loss run and continue to impact your premium until they close.
Open claims vs. closed claims
An open claim is a claim the carrier has not yet resolved. It may still be in litigation, the injured party may still be receiving medical treatment, or the carrier may be negotiating a settlement. Open claims appear on your loss run with a "paid" amount reflecting what's been spent so far and a "reserved" amount reflecting the carrier's estimate of future costs. Underwriters treat open claims as ongoing risk. The total incurred (paid + reserved) counts against you during underwriting even if the reserved portion is never paid.
A closed claim is resolved. The carrier has either paid it out and closed the file or determined the claim was not covered and closed it without payment. Once a claim closes, the "incurred" amount is final and no longer subject to change.
Large reserves can inflate your perceived risk. Carriers often set conservative reserves on claims to protect their balance sheets. A workers' comp claim with $10,000 paid to date might carry a $50,000 reserve if the injured worker is still in treatment and the carrier is assuming a worst-case outcome. During underwriting, the new carrier sees $60,000 incurred even though only $10,000 has been paid. If the claim later closes at $15,000, your loss run still showed $60,000 when the underwriter priced your renewal. This is one reason why closing claims quickly — through settlement or medical resolution — can reduce premium increases.
Experience Modification Rate (MOD)
Your experience modification rate, or MOD, is a multiplier applied to your workers' compensation premium. A MOD of 1.0 is neutral — you pay the standard rate for your industry and payroll. A MOD below 1.0 (e.g., 0.85) reduces your premium. A MOD above 1.0 (e.g., 1.20) increases it. The MOD is calculated by comparing your actual workers' comp claims to the expected claims for businesses of your size and classification over a three-year period.
How the MOD is calculated
Your MOD is recalculated annually by your state's rating bureau (in most states, the National Council on Compensation Insurance, or NCCI). The calculation looks at your workers' comp claims over the most recent three-year period, excluding the current policy year. If you're renewing in 2026, the MOD calculation uses claims data from 2023, 2024, and 2025. The 2026 policy year is excluded because it's not complete.
The formula compares your actual incurred losses (paid + reserved) to the expected losses for businesses with your payroll and classification codes. If your actual losses are lower than expected, your MOD drops below 1.0. If your actual losses are higher, your MOD rises above 1.0. The calculation also weights frequency more heavily than severity — many small claims hurt your MOD more than one large claim.
Frequency vs. severity
The MOD formula penalizes frequency more than severity. Three workers' comp claims of $5,000 each ($15,000 total) will raise your MOD more than one claim of $15,000. This is intentional. Frequent claims suggest poor safety practices, inadequate training, or systemic risk that will produce more claims in the future. A single severe claim could be bad luck. High frequency is a pattern.
This is why businesses with multiple small claims often see larger MOD increases than businesses with one catastrophic claim. If you have three minor workers' comp claims in a year, your MOD calculation treats that as evidence of a dangerous operation. One severe claim — a fall from a roof that results in a $100,000 medical payout — is weighted less heavily because it's treated as an outlier.
The three-year window
Your MOD calculation uses a rolling three-year window. Claims that occurred more than three years ago (excluding the current policy year) fall off the calculation. If you had a bad year in 2023 with multiple claims, those claims will impact your MOD through your 2027 renewal. Starting with your 2028 renewal, the 2023 claims age out and no longer affect your MOD.
This three-year window means that improving your safety record pays off, but it takes time. You cannot reverse a bad year immediately. If your MOD is 1.25 because of claims in 2023 and 2024, and you have zero claims in 2025 and 2026, your MOD will gradually decline as the old claims age out. But it won't drop to 0.85 overnight. It takes three clean years for a bad year to fully disappear.
How much does the MOD impact your premium?
The MOD is applied as a multiplier to your workers' comp base premium. If your base premium (before the MOD) is $20,000 and your MOD is 1.20, you'll pay $24,000. If your MOD is 0.85, you'll pay $17,000. The difference between a 1.20 MOD and a 0.85 MOD on a $20,000 base premium is $7,000 per year. Over three years — the time it takes for a bad year to age out — that's $21,000 in extra premium.
For businesses with high payrolls or dangerous classification codes (roofing, electrical work, concrete), the dollar impact of the MOD is even larger. A contractor with a $100,000 base workers' comp premium and a MOD of 1.30 is paying $30,000 more per year than they would at a 1.0 MOD. This is why safety programs, claims management, and early return-to-work protocols are not just regulatory compliance exercises — they are financial strategies that directly reduce insurance costs.
What Underwriters See When They Read Your Claims
Underwriters do not just look at the total dollar amount of your claims. They read the descriptions. They look at the type of claims, the frequency, whether the claims are similar, and whether your responses to past claims suggest you've addressed the underlying causes. Two businesses with $50,000 in total claims over three years can receive wildly different premium quotes depending on the story the claims tell.
Patterns vs. one-offs
One slip-and-fall claim at a client site is an incident. Three slip-and-fall claims at three different client sites is a pattern. Underwriters interpret patterns as evidence of systemic risk. If your loss runs show three workers injured in vehicle accidents, the underwriter assumes your fleet safety program is inadequate. If your loss runs show three customers injured by the same hazard, the underwriter assumes you haven't corrected the problem. Patterns drive premium increases more than isolated incidents.
Claim type and coverage line
A $25,000 workers' comp claim has a different risk implication than a $25,000 general liability claim. Workers' comp claims are more common and more predictable. GL claims — especially bodily injury claims from your work — signal that your operations are creating liability exposure for third parties. A contractor with one GL bodily injury claim and zero workers' comp claims will see a larger GL premium increase than a contractor with one workers' comp claim and zero GL claims.
Similarly, auto liability claims suggest driver behavior problems. If you have three at-fault auto accidents in two years, underwriters assume poor driver screening, inadequate training, or lack of fleet oversight. Your commercial auto premium will reflect that assumption.
What you did after the claim
Underwriters ask: what did you change after the claim? If you had a workers' comp claim for a fall from a ladder, did you implement a fall protection policy? If you had a GL claim for property damage during work, did you add site inspection protocols? Carriers want to see that you've addressed the root cause. When you apply for new coverage or renew, your broker should submit a letter of explanation for any significant claims describing what happened and what corrective actions you took. This doesn't erase the claim, but it signals that you manage risk actively rather than passively absorbing losses.
When Claims Fall Off Your Record
Claims do not stay on your record forever. The relevant window depends on the coverage line and the carrier's underwriting guidelines, but the standard periods are:
- Workers' compensation MOD: Three-year rolling window, excluding the current policy year. A claim from 2023 affects your MOD through your 2027 renewal and ages out starting with your 2028 renewal.
- General liability and auto: Most carriers look at five years of loss history when underwriting GL and auto. Claims older than five years are typically not considered, though some carriers extend this to seven years for large or unusual claims.
- Surplus lines carriers: Some non-standard and surplus lines carriers only look at three years of loss history, which can make them viable options for businesses coming off a bad claims year who can't get competitive quotes from standard carriers.
The important takeaway: bad years age out. If you had a cluster of claims in one year, those claims will continue to impact your premium for three to five years depending on the coverage line. After that, they fall off and your premium should decline, assuming you haven't incurred new claims.
What to Do After a Bad Claims Year
A bad claims year is painful, but it's not permanent. Here's what to do to minimize the long-term premium impact and position yourself for better rates as the claims age out.
Document corrective actions
For every significant claim, write a brief internal memo describing what happened, what caused it, and what you changed to prevent recurrence. When you renew or shop for new coverage, your broker should submit these memos with your application. Underwriters want to see that you've addressed the root cause. Without documentation, they assume you haven't.
Close claims quickly when possible
Open claims with large reserves inflate your perceived risk. If a claim can be settled or closed, work with the carrier to close it. This is especially important for workers' comp claims where the injured worker has returned to work and medical treatment is complete. Closing the claim removes the reserved amount from your loss run and reduces your incurred total.
Implement formal safety programs
A documented safety program signals to underwriters that you're managing risk proactively. Driver safety training, jobsite safety protocols, equipment maintenance schedules, and incident reporting procedures all demonstrate that you've taken claims seriously. Some carriers offer premium credits for formal safety programs, and even carriers that don't offer explicit credits will price your renewal more favorably if you can show a structured approach to loss prevention.
Consider higher deductibles
If your claims were relatively small, a higher deductible can reduce your premium and signal to underwriters that you're willing to retain some risk. A contractor who moves from a $1,000 deductible to a $5,000 deductible after a bad year is telling the carrier: "I'm focused on preventing large losses, and I'll absorb the small ones." This can result in a lower premium and better renewal terms.
Shop multiple carriers
Different carriers weight claims history differently. Some carriers penalize frequency heavily. Others are more concerned with severity. Some carriers specialize in writing businesses with recent claims at competitive rates. After a bad claims year, your incumbent carrier may not offer the best renewal terms. A broker who works with multiple carriers can shop your risk to find carriers whose underwriting philosophy is more favorable to your specific claims profile.
Use surplus lines carriers as a bridge
If your claims history has made you uninsurable in the standard market, surplus lines carriers can provide coverage while you work to clean up your loss runs. Surplus lines premiums are higher, but they allow you to maintain continuous coverage, stay compliant with contracts and licensing requirements, and demonstrate three years of improved loss history so you can move back to the standard market at better rates.
Tenet issues certificates on a 15-minute SLA. When you're working to secure new contracts after a tough claims year, speed matters. We issue certificates of insurance around the clock so you don't lose opportunities while waiting on paperwork. If you need coverage that reflects your actual risk profile — not just your recent claims count — we can help.
Frequency Is the Killer
If there is one principle to take away from this guide, it's this: frequency is worse than severity. Underwriters and MOD formulas both weight frequency more heavily because frequent claims indicate systemic problems. One $50,000 claim is bad. Five $10,000 claims is worse. The MOD calculation, carrier underwriting models, and renewal pricing all penalize frequency more than they penalize a single large loss.
This means that preventing small claims is just as important — if not more important — than preventing large ones. A contractor who has three minor workers' comp claims in a year because of inadequate safety training will see a larger premium increase than a contractor who has one catastrophic fall-from-height claim. Invest in safety, training, and loss prevention not to avoid the $100,000 claim, but to avoid the five $5,000 claims that will wreck your MOD and price you out of the standard market.
Common Mistakes
Not requesting your loss runs before renewal
You should know what your underwriter sees before they quote your renewal. Request your loss runs 60 to 90 days before your renewal date. If there are errors — claims that were closed but still show as open, claims that belong to a different policyholder, incorrect incurred amounts — you have time to correct them before the underwriter prices your renewal.
Assuming closed claims don't matter
Closed claims stay on your loss runs for three to five years depending on the coverage line. Just because a claim closed doesn't mean it stops impacting your premium. Underwriters look at the total incurred amount and the frequency of claims, not just whether they're open or closed.
Not documenting corrective actions
Without documentation, underwriters assume you haven't done anything to prevent recurrence. A one-page memo describing what you changed after a claim can be the difference between a 20% increase and a 50% increase at renewal. Your broker should submit these memos with every renewal application.
Ignoring small claims
Small claims count. Three $3,000 claims will hurt your MOD and your renewal premium more than one $15,000 claim. Don't dismiss minor incidents as inconsequential. Investigate the cause, implement corrective actions, and treat them as seriously as you would a large loss.
Not shopping after a bad year
Your incumbent carrier may not offer the best terms after a bad claims year. Different carriers have different appetites for risk, and some specialize in writing businesses with recent claims. A broker who works with multiple carriers can find better options than simply accepting your renewal terms.