Experience Mod Reduction Plans – Are They Really Worth It?

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Experience Mod Reduction Plans Can Be Preservation Plans

The Experience Mod Reduction Plans –  are they really worth it ?  Yesterday, I was presented with two different employers’ loss runs and  Experience Modification Factor Worksheets (Mod Sheets).  One employer had a good E-Mod of .86.  The other employer had an EMod of 1.3.

 

Black board as Experience Mod Reduction Plans
Wikimedia Commons – Masae

The Mod reduction plans for each of the two employers would not vary that much.  The function of one mod reduction program was to reduce the Mod below 1.0 so the employer could bid on projects.  Many contractors now require a sub-contracting company to have a Mod of less than 1.0.

Even though the second company had a mod of .86, I would also recommend not only an Emod reduction program, but an Emod preservation program.  What would be involved with an Emod preservation program?

The answer to the question from the post title is under almost all circumstances, Mod reduction or preservation programs will almost always save an employer $.   The Mod preservation program looks to keep the employer’s low mod in place by performing almost the same tasks as a Mod reduction program.

The Emod preservation program’s importance can be justified with almost the same justification when keeping a grade in school from falling from an A to a B.  The same amount of effort has to be expended to preserve an A as it takes for a B student to raise their grade to an A.

If your company has an EMod of .86, then you are still going to use a very large amount of effort to keep the Mod from increasing to .9 and then subsequently to a 1.0.

Clients Experience Mod Reduction Plans with similar E-mod
Wikimedia Commons – Dell’s Official Flickr Page

We recently had two trucking clients with similar Mods have their Emod increase from .89 to almost 1.1 within two years.   Both clients had relaxed their:

  • Safety programs
  • Loss run reviews
  • EMod reviews.
  • Claim reviews

The Emod jump from .89 to 1.1 is very significant.  That means at a minimum, each company’s workers comp insurance had increased a ball park estimate of 20%.

I have also found a much higher degree of effort required when assisting clients in preserving a lower Mod than decreasing a higher Mod.   The higher Mods will usually have “red flag” areas to identify and work on very quickly.

This is not so with a lower Emod clients as there may be no “red flags” for justifying a rapidly increasing Mod.   Our low Mod clients have to use their crystal balls to proactively handle their claims as there are no obvious areas to examine for a reduction.

The bottom line is that if your company has a low Emod, there is much more room for it to become worse (higher) than an employer with a higher Emod.

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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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