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Experience Mod Catastrophe – 1.01 Causes Business Losses

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Experience Mod Catastrophe – Going Over 1.0

Every week J&L Risk Management Consultants receives an employer inquiry on what is becoming a Workers Comp Experience Mod Catastrophe. Let us look at how it happened to many employers.  The employers’ situations are striking similar.   A similar article that I published in 2017 on this subject – worth a look.

Contacts from insurance agents increased by at least 60% since 2015 hoping to assist their insured clients with avoiding this catastrophe.

pic red flag experience mod catastrophe

Let us look first at the three Experience Mod levels.  They are:

  • Below 1.0  – credit Mod – not a problem – green flag
  • At 1.0 – neutral Mod – yellow flag – on a watch list
  • Above 1.0 – debit Mod- red flag – loss of business

An Experience Mod at its most basic compares highly similar businesses,  Rating bureaus such as NCCI, WCIRB, and PCRB assign an Experience Mod to each employer’s business that is large enough to be rated.  The Mod becomes part of the premium calculation by an insurance carrier.

The Unmentioned Part

This procedure does not cover the unmentioned second part which can turn out to be an Experience Mod catastrophe.  Many risk managers for large corporations and governmental entities now look at the Mod as a credit risk rating of sorts.  Many risk managers that I have spoken with on this subject started using the Mod as part of the bidding process in 2010 or earlier.

I was able to assist a large portion of these clients by writing a Mod analysis letter to the risk manager. The letter worked part of the time, but only if the future projected Mod was going to decrease to a neutral Mod of 1.0 or lower.

Small to mid-sized contractors began looking more closely at the potential sub-contractor Mods. The Experience Mod catastrophe risk has increased with smaller contractors.

If an employer’s Mod increases to above 1.0, many employers will find themselves out in the cold on any type of bidding process.  The Experience Mod catastrophe can occur in any state – even the Monopolistic States. In other words, the difference in going from a .99 Mod to a 1.01 Mod is not just .02.  The .02 increase can be seen as miles apart – not just a 2% increase.  The Experience Mod catastrophe is now in play.

How Do You Turn It Around?

The best way to turn your Experience Mod around is by becoming more safety-oriented.  Most insurance carriers have safety units that will provide your company with materials and suggestions.  Almost all states have some type of safety assistance for a nominal fee.

This whole website has hundreds of articles on avoiding an Experience Mod catastrophe including claims loss run reviews.  Loss run reviews can be a great place to start.

 

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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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