An Acceptable E-Mod (X-Mod) Usually 1.0
The question is what is an Acceptable E-Mod (X-Mod). The level of questions on XMods/EMods usually increases this time of year. The largest percentage of policies renew on January 1. The rating bureaus such as NCCI usually begin to promulgate and report the E-Mods for the January 1 polices starting late August and continuing through September.
There is actually no exact level of an acceptable E-Mod or X-Mod. As the saying goes, we can always do better. As I have posted often, the average E-Mod for the same type of business is 1.0. At this level, your company is considered to have the same level of safety as similar companies.
I have seen Mods as low as .6. I have also seen Mods at 2.2. I am not sure how a company would improve with a .6 Mod. I have seen companies with a very low Mod suddenly increase to over 1.1 with a sudden spate of a few minor accidents.
I look at Mods as being similar to grades in school. It is much more difficult to keep an A grade than it is to improve from a D. The E-Mod formula in its simplest form is:
Actual Losses /Expected Losses.
A company that provides administrative assistants is going to have a much lower level of expected losses as this type of company is considered to be very safe. The unfortunate result of being a low risk company is that a very few minor injuries can cause an E-Mod to increase dramatically.
Using the formula above, the administrative assistant company’s expected losses for a given policy year was $8,500. The actual losses were 9,500.
The company’s E-Mod would be
9,500/ 8,500 = 1.11
Using the same actual losses, a trucking company would have a higher level of expected losses as they are considered to have more risk
9,500/13,500 = .70
The above example shows that companies with lower expected losses must be as safety conscious as any other company. The E-Mod is affected even more heavily by smaller losses.
The bottom line is there is really no such thing as an acceptable E-Mod (X-Mod). If a company becomes lax on their safety for even a brief period of time, an accident that may have been avoidable is now part of their Mod.
A company with a .6 E-Mod must be vigilant in their safety program. A company with a 1.6 E-Mod must improve their safety program immediately while keeping their Mod from decaying further.
“E-Mod, Mod, and X-Mod are basically the same thing. X-Mod is used by California’s rating bureau.
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