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Californias WCIRB New X-Mod Formula Penalizes Unsafe Employers

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Californias WCIRB X-Mod Formula Heavily Penalizes Small Unsafe Companies

This month Californias WCIRB produced a new small employer X-Mod formula.

Yesterday, I attended the WCIRB Conference in Burbank, CA.  The WCIRB makes one work in their workshops.   They always put on great workshops.

Businessman Waiting For Californias WCIRB Businesswoman Carrying Case
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One of the things I noticed that jumped off the page was the rating formula to calculate the X-Mods had changed considerably.  The other main rating bureau in the US – NCCI – changed their formula over three years to reflect a higher split point value.  The NCCI basically altered the formula to move more of the rating value from severity-based to recurrence-based.

I had wondered how and if the WCIRB would also change their rating formula to move more towards recurrence -based penalties from severity-based X-Mod Calculations.

Severity-based basically means a discounting factor is included that will not penalize employers that have one severe injury with very high payouts and reserves (Total Incurred).  The WCIRB removed any discounting of the Primary Loss.  The primary loss level is $7,000. The excess loss is any part of the loss over the $7,000 threshold.

Hand Pointing California's WCIRB Calculating Icon
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The discounting table (favoring small payroll employers) would discount the primary loss part of a claim.  Smaller payroll employers could not easily absorb the effect of one or two major claims.  The WCIRB was basically leveling the playing field between small and large employers.

As with the NCCI’s change in split-points, the WCIRB is making sure that safe employers are not subsidizing unsafe employers.  By eliminating the primary loss discounting table, all employers will be penalized more for repetitive injuries.  Unsafe smaller employers will feel the effects in their next X-Mod calculation.

The  Californias WCIRB’s new formula will cause small unsafe employers to pay more for Workers Compensation insurance. I will cover the formula change next time.

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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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