A Very Important Rule Change by the NCCI –
As I started to cover in the last post, late in 2003, the NCCI made a rule change that benefited Workers Comp insurance carriers greatly and ended up costing employers millions every year.
The old rule was that no Workers Comp policy may appear in an Experience Modification Factor (E-Mod) for a certain employer more than three times. That meant that multiple policies could not be piled into an employer’s E-Mod. Now, there are no actual limits on the number of policies that can be calculated into an E-Mod for a Workers Comp policy.
To keep this post as concise as possible, there are three basic rules. They are:
- The policy must have incepted (started) between 12 and 57 months prior to the policy.
- The policy periods covered cannot exceed 45 months in total .
- A policy can be used multiple times as long as rules #1 and #2 are not violated.
This rule can create very dangerous situation for employer that decides to shorten their policy period. You could end up stacking 4 or more years of policies into your E-Mod. This is especially true if one of the oldest polices had a very bad year for accidents. Under the old rule, the policy could not be used if it had been used three times in the past for an E-Mod. In the next example, which was from a real policy, I will show how this rule can be very dangerous.
The reason that the NCCI had instituted the new rule was that certain unscrupulous agents or employers were stacking short-term policies to manipulate the rules to cause a lower E-Mod. We have seen this a few times in our Workers Comp policy reviews.
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Article provided by James J Moore, AIC, MBA, ChFC, ARM. All articles are original content. Check out the full website at www.cutcompcosts.com.