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Claims Affect Premiums For How Long – Reader Question


Claims Affect Premiums For Multiple Years

How do claims affect premiums for my company? This is a question we receive very often.

The first thing to look at is the state laws and rules on how your E-Mod or X-Mod is calculated. That will have some bearing on the length of time.

Vector Graphic of Man Claims Affect Premiums And Flying Money

Most states calculate the E-Mod/X-Mod over three years. However, the three-year span does not “kick in” immediately the next year. What happens, for example in 2008 will not affect your insurance company premiums until the 2010 policy. Why? Workers’ Comp is calculated on a delayed system. The E-Mod for a claim in 2008 will hit the E-Mod in the 2010, 2011, and 2012 policy years.

Yes, you pay THREE times for a bad claims year. That is the way the Workers Compensation system is structured for losses. Do you pay 1/3, 1/3, and then 1/3 of the bad claims year of 2008? No, You will pay more like 60%, 60%, and 60%. But wait, that does not add up to 100%. You can now see how a bad claims year can be very expensive.

The usual reason for having a bad claims year is the number of claims, not just one big claim.   The old saying that five  $20,000 claims are much more expensive than one $100,000 claim is very true in almost all cases.

Update – The main rating bureaus – NCCI and WCIRB have both altered their E-Mod X-Mod formulas to make repetitive claims much more influential on what you will pay in future years for workers’ compensation coverage.

The NCCI or State Rating system that is in place amplifies the amount that the Work Comp carrier reserves on the claims. Is it a fair system? It is the one we have in place. The best way to stay out of the system is with a safety program, making sure that you are being charged the proper premiums, and making sure that the reserves on your files are accurate.

Next Up – SC Governor Sanford is now in Federal Court trying to keep Workers Comp under control in SC.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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