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Work Comp Rate Bureaus Becoming Credit Bureaus?


WC Rate Bureaus and The 1.01 Employer Conundrum

All Work Comp Rate Bureaus consider an employer with a 1.0 Mod as your average employer in reference to accident rates and severity.  However, as I wrote in my last article millions are on the line if a Mod increases above 1.0.

paul otlet work comp rate bureaus sitting at desk
Wikimedia Commons – Paul Otlet

Many employers are now feeling the pinch when their Mod increases or stays above 1.0.  A few years ago the Experience Mod Rating formula was changed by NCCI.   The Primary  Loss part of the claim increased from $5,000 to $15,000.

The Primary Loss  equates basically to the part of the Total Incurred that is not discounted.  The Excess Loss has a discount factor that is applied to the reserves above the primary loss.

An E-Mod of 1.04 from the Workers Comp rate bureaus can actually have an employer shunned from bidding on governmental contracts.  How do I know this is the case?   Over the past few weeks and when I wrote the article earlier this week, I heard from quite a few employers with that very concern.

Hand Analyzing Work Comp Rate Bureaus Arrow Up And Down With Coins

The work comp rate bureaus will usually say that we only process the numbers and generate Mods.  That may be true, but now many governmental agencies and large employers producing bids think otherwise.

One of the bid considerations for major contractors and governmental agencies is having a 1.0 E-mod or STOP HERE and go no further before the employer produces a bid.   It is not a bid consideration.  It is a denial.  

How should the Rating Bureaus fix the situation?  They should not be responsible.  The two parties responsible consist of the employer and the contractor.

A great suggestion to the Risk Managers would be to stop at the first number to the right of the decimal.  For instance, a Mod of 1.08 equals 1.0.   In my opinion, an employer with a 1.08 Mod is not that much riskier than an employer with a 1.0 Mod.

Man Standing Work Comp Rate Bureaus With Woman Behind

I have spoken to a number of  Risk Managers that say – hey, I have to draw the line somewhere.

The other side of the coin points to the employers.  Spending funds now for safety remains the answer.    The expenditures will pay off in time.  The business owners and the Senior Management of companies need to allow time for safety efforts to take effect.

Throwing funds at safety for one year and expecting the Mod to lower immediately is not the way the Workers Comp system works.   Many safety managers and in fact, risk managers were shown the door because the company’s Mod did not move.  The Mod process takes four years to show fully.

As the author Charles Givens once said in his book Super Self  – if you want to win in someone else’s ballpark, you have to play by their rules.   The Work Comp Rate Bureaus are the ballpark.  A great Safety Program keeps you playing in your ballpark.  No injuries mean you get you play in your ballpark.

J&L Risk Management Consultants assisted many employers to reduce their Experience Mods over the years.  Other than a safety program, a full Loss Run Analyses brings down Mods as long as your company does not have a string of accidents.

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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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