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Experience Modification Factor (EMod/X-Mod) Credit Score Hell


Experience Modification Factor (EMod/X-Mod) Is Like A Credit Score

The Experience Modification Factor can be thought of as a credit score. There have been many articles written recently on the upcoming credit law changes effective February 22nd. The articles made me think which is the hardest to improve or correct if there are errors – your personal credit score or an E-Mod/X-Mod?

Blackboard Experience Modification eraser
Wikimedia Commons – Alessandro Patelli

One of the ways that credit scores and E-Mods differ is the length of time in the past that a correction can be made if an error exists. There is no limit on how far back an individual can search for an error in their credit report. Even if the error happened 10 years ago, you have the opportunity to disprove the error.

In the Workers Compensation system, anything older than 45 months cannot be reviewed  (with very few exceptions)- no matter how gross the policy or reserve error might have been to your E-Mod. There is one way to go further into the past and that is with a complaint to the Insurance Commissioner. We have found the complaints on very old policies to fall on deaf ears. The only time that we have been able to have a very old policy fixed was due to an error by the State Rating Bureau, not the Workers Comp insurance carrier.

This is a very important point. Your company needs to monitor its Workers Comp  Experience Modification Factor every year. Errors must be found quickly or they will just float off into the past.

Diagram of Credit score like experience modification factor
Wikimedia Commons – User:Pne

On the other side of the coin, the Workers Comp E-Mod or X-Mod system does not reflect on your safety record of the present. A safety program has to be in place for four years. We had assisted a Risk Manager of a South Carolina transportation company. Their E-Mod actually increased and the Risk Manager’s feet were held to the fire. What management did not realize is that the Workers Compensation system is also a delayed system. Having a great claims record for just the current year will mean little. A safety and claims program has to be in place for three years or more for the effect to be fully realized. In the economic environment of today, many senior management teams can become very impatient very quickly.

Making Workers Compensation the project of the month and moving onto something else will usually end up making everyone very frustrated. The process needs to be in place for 36 months or longer to see its full effect. The first year of a great safety program will not show up for two years at a minimum on the E-Mod and it will only have an effect of 33% or less.

Icon Credit Card Experience Modification Receipt

I am posting generalities, but the preceding paragraphs are very true. The E-Mod or X-Mod systems do not show any historical data beyond 45 months and less than 12 months. Do I agree with the system? I always answered that it is the system we have in place, so we have to deal with it.

A correction to a personal credit report will have an immediate effect. The credit scores indicate what is happening now with your personal finances. An E-Mod is delayed by at least 6 months. Credit scores operate very far into the past and right up to the moment.

How does a company counteract or manage the EMod or XMod system? There needs to be someone on staff that understands the systems fully, even if it is an outside consultant. There needs to be a workable plan in place. That plan must be sustainable. Claim reserves and policies need to be examined quarterly if not more often. If anything looks odd, it probably is.

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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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