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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 in the world of workers’ comp for decades.  Let us look at the definition of Experience Mods from the WCIRB – California’s Rating Bureau and a quick video from NCCI that covers 40+ states – the two largest Workers Comp Rating Bureaus.

WCIRB Definition

Experience modification is calculated by comparing the actual losses to the expected losses. Actual losses are the medical and indemnity claim costs resulting from a work-related injury that an insurance company has paid or expects to pay in the future. Expected losses represent a business’s projected losses for the industry in which it operates. In other words, given its classifications and payroll, its expected losses represent the statistical average losses that a business of a similar size in the same industry is expected to incur. Given two businesses within the same industry, the larger the business, in terms of payroll, the more losses that business is expected to incur.

NCCI Video

The video is one minute long – yes, one minute. There are many more videos on Mods in NCCI’s Microlearning Center.


Experience Mod Predictions – Already Built In

The Rating Bureaus usually calculate (promulgate-fancy term) a company’s Experience Mod approximately 3 – 4 months before the start of your new policy (inception).  But wait you say, what if I want Experience Mod predictions beyond the upcoming renewal?

J&L does those quite often.  You can buy an estimator or have an expert do it for you.   Two areas to cover are IBNR – incurred but not reported and other outside factors.

Experience Mod Predictions – Outside Factors

Outside factors can change the prediction immediately.  How so?   Let’s cover a few –

  • State rating values – the state can change rating values at any time.  That means one of the states that you are operating in has changed its rating values and reported them to NCCI.   The goalposts have been moved.
  • Late carrier reporting – J&L monitors all of our clients’ Experience Mod changes.  We have seen a maximum of 17 Mod changes due to the insurance carrier reporting data late in one year.
  • A  string of accidents – if your company, has a lower Mod, for instance, and you have a few or many accidents any of your Experience Mod predictions will not have a large amount of validity.  On the other side of the coin, if your predicted Experience Mod accounted for multiple accidents and you have a safe year with no accidents, the predicted Mod will not be accurate.   Your company will require a Mod recalc.


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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