NCCI Sends Wake Up Call to Unsafe Companies

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Unsafe Companies – NCCI Says Pay Your Fair Share

The NCCI (National Council on Compensation Insurance) has dramatically changed the way that companies will be rated for any polices that are effective after 1/1/2013. Unsafe companies are now going to have higher E-Mods. Companies with much better loss histories will see their E-Mods shrink on any 2013 renewals.

Emoticons Walking on Wood Ladder NCCI Unsafe Companies
(c) 123rf.com

I was one of the first Workers Comp advisers that warned about these upcoming changes to the E-Mod system. There is a 27 minute video here that explains the changes.

I will summarize them for those who do not want to watch the video. Nowhere in the video is there mention of a change to any type of classification codes. Classification codes have been changed in a systematic process since 2008.

The basic premise of the way NCCI calculates E-Mods is there are two facets to any claims. They are:

Primary Loss = the first $5,000 of any Workers Comp claim

Excess Loss = any part of the loss above $5,000

The new rating system doubles the Primary Loss:

  Primary Loss = the first $10,000 of any Workers Comp claim

  Excess Loss = any part of the loss above $10,000

Graphic Of Paper Folder Of Diagram NCCI Concept
(c) 123rf.com

Primary losses increase a company’s E-Mod much more dramatically than Excess Losses. Excess Losses are multiplied by a reduction factor. The reason is NCCI and all rating bureaus think that many smaller claims are much more risky than one or two large claims.

The rating bureaus do not penalize a company for one large loss. Even safe companies statistically cannot prevent one big loss. A batch of small losses is much more likely to produce a few or many large losses. This is one of the major underpinnings of the E-Mod system.

When your company renews its policy in 2013, you will likely be under this system. The most expensive part of the claim (Primary Loss) will be twice the size that it was in the past. This means unsafe companies with many losses could see their E-Mods jump dramatically.

I am not saying that I totally agree with the E-Mod system. However, it is the system in place. We all have to deal with the system. Knowing how to best work within the framework will save $, time, and aggravation.

Your company’s safety program is now worth than in the past. Due to the present economic conditions, I have seen Safety/Risk Management departments significantly reduced or eliminated overall. Reviving or enhancing a safety department is a shrewd business move.

I will cover more on the upcoming changes in one of the next articles by comparing losses under the old system and the one upcoming in 2013. There is even a more shocking development with the NCCI for 2014.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt 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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