Experience Mod Calculation Shortcut With 10 Ways To Reduce

The Experience Mod Calculation Shortcut – Back To Basics

Lately,  Experience Mod calculation questions have come into our offices at a very high rate compared to other subjects.   The Experience Mod is also known as

E-Mod, X-Mod, EMR, etc.   Many factors exist that can change your Workers Comp premium. The Experience Mod calculation seems to receive the most attention.

The formula can be simplified into:

What happened in our Experience Period  / What The Rating Bureau Expects To Happen  or even more simply:

Reality /  Expectations  

One big time caveat exists with the Expectations part of the formula – Expectations come from how other  similar companies to yours have performed over the past few years.

If say,  you are a construction company and construction companies have become much more safe in the state(s) that you operate and your company does not become safer, then you may have a higher Mod. Why?  The Rating Bureaus have recorded much lower claims in the Classification Codes that represent your company operations.

Their expectation of claims (Total Incurred) has lowered.

A low E-Mod does not guarantee insurance.   Market forces sometimes will cause a company with a low X-Mod to not find coverage in the conventional Workers Comp marketplace.   Many companies experienced this conundrum over the last 20 years.

How does one avoid being hit with a large E-Mod?   Safety always counts. The complete E-mod system is predicated on rewarding safe companies and penalizing the unsafe ones.

I have attended Rating Bureau seminars, webinars, conferences, etc. where the presenters remarked – so that the safe companies are not subsidizing the unsafe ones.   The NCCI changed their formula a few years ago to more heavily penalize unsafe companies.

The WCIRB has totally redone their X-Mod formula – actually twice for smaller companies.  This formula looks to also penalize unsafe companies.

What to do? 10 Ways To Possibly Reduce Your Experience Mod

1. Safety remains the key.  We have seen companies cutting or eliminating their safety and risk management staff – rolling the workers comp dice.  Higher penalties may now justify safety expenditures.
2. Make sure you are classified properly.   Do the Class Codes represent what you do?
3. Review your policy, audits, and any other material you receive such as Policy Endorsements.
4. Reach out for assistance.  No company is an island.
5. Start talking to your broker/agent more than just at renewal
6. Review your loss runs all the time.  If you have online access, get to it.
7. Always make sure you follow the Six Keys To Workers Comp Savings – written in the 1980’s by me.
8. Search the articles here (box at top right of page)  for any questions you may have on Workers Comp.
9. Understand that Workers Comp takes many years to correct.   Safety today = workers comp savings in the future.   This is the wrong place for immediate gratification.
10. Look at your Schedule Rating Factor 
11. Bonus – Join Associations and Safety Groups – we have noticed that companies that join associations and/or safety groups seem to perform better with their Mods – not sure why.   #12 may explain this one.
12. Pay attention – companies that turn their attention to Workers Comp always save $$ in the long run.  Weed the garden.

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