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Understanding the Experience Modification Factor. Presented by Steve McCarty, CSP Risk Control Specialist PMA Companies. Today’s Objectives:. Establish common, practical knowledge about Experience Modification Factors.

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presented by steve mccarty csp risk control specialist pma companies

Understanding the Experience Modification Factor

Presented by Steve McCarty, CSP

Risk Control Specialist

PMA Companies

today s objectives
Today’s Objectives:
  • Establish common, practical knowledge about Experience Modification Factors.
  • Identify ways one can have an impact on the Experience Modification Rate and save your company money.
questions to ask yourself
Questions to ask Yourself:
  • What is your current mod and your three year mod trend?
  • What will the impact be of the next year to “roll off” the calculation? (+ / - )
  • What will the impact be of the next year to come into the calculation? (+ / - )
  • *What can we do to impact the mod?
experience modification the basics
Experience Modification – The Basics
  • Also known as EMF, X-Mod or Mod
  • Based on 3 Year Loss History*

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11

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where do exp mods come from
Where Do Exp Mods Come From?

Rating Bureaus

  • NCCI
  • Certain State Rating Bureaus
    • Pennsylvania
    • Delaware
    • New Jersey
    • + more
why are exp mods important
Why Are Exp Mods Important?
  • Ability to Obtain work
  • Premium Calculator (Manual rates are multiplied by the Mod)
the rating process 1 2 3 4
The Rating Process: 1-2-3…4
  • An actuarial based method
  • Codes exist for all ‘professions’
  • Bureau sets rates ($) for each code based on claims experience in the class
  • Rates are used by insurance companies for premium basis
manual premium
Class Code Rate

Class code based upon nature (risk) of work

Cost per $100 of payroll

Examples:

Code 7373 – School Bus Contractor: $4.94 per $100 of payroll

Code 8385 – Bus Company Garage Employees: $3.97 per $100 of payroll

Code 7382 – Bus Co All Other Employees: $8.25 per $100 of payroll

Code 8810 - Clerical is $0.25 per $100 of payroll

Class Rate X Class Payroll/$100 = ‘Manual Premium’

Everyone with same class codes in the same state starts with same manual premium.

Manual Premium
developing your mod
Developing Your Mod

NCCI compares:

your actual losses (3 yrs)

tothe expected losses in the class over a three year period

= Your Exp Mod

example 100 000 annual manual premium
Example: $100,000 annual manual premium
  • DEBIT (1.5 = $150,000)
    • Base (1.00 = $100,000)
    • CREDIT (0.50 = $50,000)
sales required to pay for a debit mod
Sales Required to Pay for a Debit Mod

If your company profit margin is:

common misconceptions
Common Misconceptions
  • Zero dollar incidents impact calculation
  • Insurance companies calculate and set rates
  • ExMods can never be ( < ) .75 & ( > ) than 1.5
  • A company can not have a ( + ) impact on their ExMod
exp mods incentives for both parties
Exp Mods: Incentives for Both Parties
  • Motivate business to perform well
  • Motivate carriers to write less than average business
  • A very practical, numbers driven system
some tough president questions
Some Tough President Questions
  • We had a major increase in our WC premium, did you know this was coming?
  • We couldn’t bid on a project due to our X-mod. Why?
  • If we have a good year this year, will it go back down?
  • Are we having a good year?
  • Our experience mod is 1.54. Is that good?
  • What direction is it heading?
  • What can we do to make it go down?
driving the mod down
Driving the Mod Down
  • A combination of:
    • Safety management
    • Claims management
  • Long term risk management mindset
controllable factor
Controllable Factor?
  • What is controllable?

Your losses!

Your claims dollars help determine your workers’ compensation premium in future years

driving the mod down1
Driving the Mod Down
  • Good job candidate screening
    • MVR review & stringent review criteria
    • Drug testing
    • Require new DOT physical
    • Consider use of functional capacity evaluations
driving the mod down2
Driving the Mod Down
  • Effective employee monitoring
    • At least annual MVR review
    • Post accident, random and for cause drug testing
    • Active driver monitoring & enforcement (e.g.,DriveCam, SmartDriveand “1-800 How’s My Driving” programs, at least annual driver shadowing etc.)
driving the mod down3
Driving the Mod Down
  • Other Workplace Controls
    • Conduct regular safety training for all existing employees in driving safety; slip, trip & fall prevention and safe lifting
    • Establish 1-person lifting limits (<75 pounds)
    • Establish footwear policies (rubber sole with good tread) and consider the required use of rated slip-resistant footwear.
    • Conduct regular hazard surveys for unsafe conditions and unsafe acts in shop/yard areas.
    • Thoroughly investigate all work-related accidents to identify root cause and actions to prevent recurrence.
driving the mod down4
Driving the Mod Down
  • Medical Management
    • Use preferred provider network physicians as recommended by your workers’ compensation carrier to reduce medical/claim costs.
    • Be creative in establishing “transitional duty” jobs that help keep employees at work even with doctor-imposed restrictions.
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Contact Information for Steve McCarty:

Phone: (410) 527-3212

E-mail: steve_mccarty@pmagroup.com