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
- 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.
- Make sure you are classified properly. Do the Class Codes represent what you do?
- Review your policy, audits, and any other material you receive such as Policy Endorsements.
- Reach out for assistance. No company is an island.
- Start talking to your broker/agent more than just at renewal
- Review your loss runs all the time. If you have online access, get to it.
- Always make sure you follow the Six Keys To Workers Comp Savings – written in the 1980’s by me.
- Search the articles here (box at top right of page) for any questions you may have on Workers Comp.
- 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.
- Look at your Schedule Rating Factor
- 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.
- Pay attention – companies that turn their attention to Workers Comp always save $$ in the long run. Weed the garden.
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