Stabilizing Value – Rating Bureaus Provide a Break of Sorts
The Stabilizing Value in Workers Compensation Rating Bureau Experience Modification Factor Worksheets saves companies premiums every day. How does this boring-sounding number help employers save premium dollars?
I am using the numbers from an EMod sheet that I have been reviewing this evening.
Basic EMod Formula
An XMod factor (EMod synonym) is represented by the very basic formula –
EMod = Actual Losses / Expected Losses
The EMod for this insured – who will remain nameless – has these numbers
EMod = Actual Losses / Expected Losses
EMod = 551,000 / 398,000 = 1.38 <<< Ouch!
The basic EMod Formula leaves the employer with a 38% increase to their premium formula. Hang in there with me – this may seem boring. The end result will be worth your time.
I want to stay on track with explaining the Stabilizing Value. Check out these definitions for the values in the below table.
Ratable Excess is calculated by using multiplying the Excess Losses by the all-important Wt factor.
Whew are you confused, you will be fine. If you are feeling number stress go see the heartwarming Mr. Rogers clip then come back.
Ok, so back to the EMod neighborhood.
| Primary Losses | Stabilizing Value | Ratable Excess | Totals | |||||
| Actual | 138,258 | 299,691 | 95,038 | 532,987 | ||||
| Expected | 99,179 | 299,691 | 68,728 | 467,598 | ||||
| Exp Mod | ||||||||
| 1.14 | ||||||||
EMod Formula From Rating Sheets (No Stabilizing Value)
The EMod Formula has many more steps than the basic one shown in the previous section. So, let us look at the final numbers without using the Stabilizing Value.
E-Mod = (Actual Primary Loss + Actual Rateable Excess Loss) / (Expected Primary Loss + Actual Ratable Excess Loss)
E-Mod = (138,258 + 95,038) / (99,179 + 68,728) = 1,39 Ouch again.
EMod Formula From Rating Sheets – With Stabilizing Value
Looking at the above table with the factor added in , one can see that the EMod dropped by approximately .25 from the values without any stabilization. A 1.14 Mod, while not the best, is better than having to pay 25% more for the same workers comp coverage.
If you pull out your Workers Comp Rating Sheets, you can see how the Stabilizing and Excess Ratable values are calculated for your company. The main reason this article was written was to show you how the Rating Bureaus cut companies some slack on their X-mods.
Besides, I only have one Mr. Rogers calming video to show you.
End Result
Actually, I found an anomaly on my client’s loss runs – which feed into the EMod Rating Sheets loss runs. The anomaly reduced the company’s Mod below 1.0. <<Much less of an ouch with the help of the stabilizing value.
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