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Workers Comp Math – Where 2 + 2 = 5.36789


A Great Example of Workers Comp Math

The crazy world of Workers Comp math has driven many people batty.   Why?

symbols of workers comp math emblem from website

Last week, I wrote an article that pointed out no one claim can wreck your  Workers Comp Experience Mod.    A few readers  contacted me in reference to my quote that the Mod will be increased not by the one big claim, but it will cause any of the other claims to be more costly.

The key is the number of claims.    Even though your company may have quite a few small claims, the chance of those becoming larger claims exists for each and every claim.    The risk is additive.

The following is an example of Workers Comp math at work from a basic risk standpoint.


Claim #Total IncurredRisk FactorTotal Risk
1098$2, 356.2.5

You  are going to have to do a little outside the box thinking on this one, but it is the main concept that E-Mods, X-Mods, etc. are based on overall.

Hand Holding Calculator Workers Comp Math Number Concept

The Risk of Increase is  how most people look at Mods.  However, you have to think of the Total Risk as an additive figure.   Each claim is not a standalone risk.   The chance of any claim increasing is greater when the risk is spread over more claims.

The above table shows that the Risk Factor of the group is 2.4.   The Risk Factor numbers are picked arbitrarily.  They are just examples. The concept is the point of this article.

If your company only had two claims – 1111 and 1098- the Total Risk Factor = .5   As you add in more claims, the Total Risk Factor increases to a higher level.

Any one of the above claims, could have a big increase in Total Incurred over the Experience Period.   Five claims will cause the risk of any one or more claims to be higher than two claims.

This articles rehashes the old saying –  Five $20,000 claims are much more costly/riskier than one $100,000 claim.   The chance of an increase goes up with each claim, not the dollar amount of each claim.

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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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