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Having Zero Claims For Current Policy Year Saves Instantly? – Not Exactly


Having Zero Claims For Current Policy Year = Instant Savings? Probably Not

I came across this situation recently while reviewing a loss run with an agent.  The question by the agent was if his insured client was having zero claims for their current policy, will that reduce premiums instantly?

graphic waste Latvia having zero cliams
(c) Wikimedia Commons – IevaT

My answer made me decide to write another article on how the Experience Modification Factor system works.   I did not like having to tell the agent the semi-bad news – having zero claims will eventually bring down the Experience Mod but will likely not show up immediately.

For more on how an Experience Modification Factor is calculated – check out this article.

Experience Mod System Works on A Delay

The Unit Statistical System – also known as UNIT STAT works on an 18-month delay.  We at J&L have heard from clients – what is the use if we do not see results?  I usually say the system is what we have to work with to try to reduce premiums for them.

Generally, having no claims in a certain policy will help their Mod drop in two years.   If their payrolls have remained steady, all the better, as the zero claim year will drop the Experience Mod like a rock in most instances.  Two things must occur for the Experience Mod Factor to decrease rapidly –

  1. A sharp claims spike in the subsequent years cannot occur – consistently low numbers of claims are the key.
  2. They cannot have had really bad claims years in the two preceding policy years.  If so, then having zero claims for the current year will be offset by adding in two bad years


The bottom line is that zero claims years cannot be surrounded by bad claims years before or after the great claims year.  Yes, the effect will occur when the bad claims years are added, but to a lesser degree.

Having Zero Claims – Answer For The Agent Client

With the upcoming renewal for the insured, I explained to the agent the insured client must have changed some type of safety practice to go from five major claims over two years with several smaller claims to having zero claims.

Having no claims is usually more than just good luck after two bad years.  The companies’ owners or senior management must have placed a higher value on safety than in the past.  The best way to reduce Experience Mods is by instituting a safety program or by modifying the safety program that was in place.

I have heard experts say that the zero claims effect will drop the Mod by 1/3.  That is not necessarily true.  For example purposes, yes,   but the Minimum Mod (a Mod with no claims) will still be in place.  I had always thought of an approximation of a 1/4 drop each zero-claim policy year.

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Experience Mod Predictions Accurate?

Experience Mod Predictions – Accuracy Depends on Who/Whom You Ask Most Experience Mod predictions can be a tedious process that has cofounded most people working

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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