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Contingent Experience Mods – When The Number Is Not the Number

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What Are Contingent Experience Mods? 

Last week, I wrote a somewhat controversial article questioning whether insurance carriers should be fined for reporting Mods late. I received a few emails and comments with one from the WCIRB directing me to an NCCI video on Contingent Experience Mods.

Graphic not Pi contingent experience mods
Wikimedia Commons – Public License

I agree there exist reasons for why a Mod would be filed late by the carrier. However, sometimes Contingent Experience Mods are not finalized (see the 3rd bullet point later in this article) or the carriers report more accurate numbers long after the employer must pay premiums using an incorrect Mod.

Contingent Experience Mods are issued by the rating bureaus to let all concerned parties (employer, agent, underwriter, etc.) that more numbers will be added in later.

Once the carrier reports the data to the rating bureau, the Mod will be revised, and a new Experience Mod will be issued for the employer.  

Then again, when is the Mod finalized?

The definition from the two largest rating bureaus on Contingent Experience Mods are:

WCIRB – I could not locate info here at the time of this article.
NCCI – This PDF file from NCCI had a few examples. 

From NCCI – Contingent Experience Mods 

Contingent: This indicates that an experience rating modification factor was produced with missing Unit Statistical data, but met the minimum data requirements set forth in the Experience Rating Plan Manual.

Since mods are produced months in advance of the rating effective date, it is possible that not all data will be received at the time that the mod is produced.

Many People contingent experience mods outside the road
Wikimedia Commons – Øyvind Holmstad

Contingent mods account for less than 1% of the total rating population. A mod can also be contingent for a unit or a specific unit report level that contains errors that make it ineligible for experience rating use. This alerts the data provider that the unit requires corrections for it to be used for experience rating purposes.

To recap, here are a few things to remember:

  • A mod will be either preliminary or final
  • Yes, a mod can be both preliminary and contingent
  • Yes, a mod can be both final and contingent

________________________________________

Other Reasons For A Mod Revision

State Rating Values – The reason that we see most often for an Experience Mod revision is the State Rating Values have changed for the Experience Period.    This has nothing to do with the rating bureau or the carrier.  

These changes occur frequently – more often in certain states.  The Department of Insurance or Workers Comp Commission has revised the rating values for a certain policy or rating period.   

Defunct Carrier (Receivership) — We do not see this reason as often currently.   Ten to 15 years ago, this reason occurred more often.  The carrier may not have data reporting personnel in place to report the number to the rating bureau.  The carrier may have downsized their data reporting department.  The numbers may possibly be reported very late. 

Finalized Contingent Experience Mod Effect 

If a carrier has not reported a certain year of data or will correct the UNISTAT data in the future, the two main effects to the Experience Mod are:

  • Higher than expected claims data – this will increase your Experience Mod (if no change in payroll values)
  • Higher than expected payroll data –this will decrease your Experience Mod (if no change in claims values)

If the year the data is not reported was a year with no claims, you should pursue this heavily with the carrier to make sure the data is reported properly to the rating bureau.  

 

 

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt 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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