presented by steve mccarty, csp risk control specialist pma companies understanding the experience...
TRANSCRIPT
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Presented by Steve McCarty, CSP
Risk Control Specialist
PMA Companies
Understanding the Experience Modification Factor
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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.
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Questions to ask Yourself:1. What is your current mod and your three year
mod trend?
2. What will the impact be of the next year to “roll off” the calculation? (+ / - )
3. What will the impact be of the next year to come into the calculation? (+ / - )
4. *What can we do to impact the mod?
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Experience Modification – The Basics
07 08 09 10 11 12
• Also known as EMF, X-Mod or Mod• Based on 3 Year Loss History*
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Where Do Exp Mods Come From?
Rating Bureaus1. NCCI
2. Certain State Rating Bureaus1. Pennsylvania
2. Delaware
3. New Jersey
4. + more
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NCCI State Map
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Why Are Exp Mods Important?
• Ability to Obtain work
• Premium Calculator (Manual rates are multiplied by the Mod)
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The Rating Process: 1-2-3…41. An actuarial based method
2. Codes exist for all ‘professions’
3. Bureau sets rates ($) for each code based on claims experience in the class
4. Rates are used by insurance companies for premium basis
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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.
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Developing Your Mod
NCCI compares:
your actual losses (3 yrs)
to
the expected losses in the class over a three year period
= Your Exp Mod
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Example: $100,000 annual manual premium
DEBIT (1.5 = $150,000)
Base (1.00 = $100,000)
CREDIT (0.50 = $50,000)
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Sales Required to Pay for a Debit Mod
Additional Costs
1% 2% 3% 4% 5%
$1,000 $100,000 $50,000 $33,000 $25,000 $20,000
$5,000 $500,000 $250,000 $167,000 $125,000 $100,000
$10,000 $1,000,000 $500,000 $333,000 $250,000 $200,000
$25,000 $2,500,000 $1,250,000 $833,000 $625,000 $500,000
$100,000 $10,000,000 $5,000,000 $3,333,000 $2,500,000 $2,000,000
If your company profit margin is:
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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
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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
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Some Tough President Questions1. We had a major increase in our
WC premium, did you know this was coming?
2. We couldn’t bid on a project due to our X-mod. Why?
3. If we have a good year this year, will it go back down?
4. Are we having a good year?
5. Our experience mod is 1.54. Is that good?
6. What direction is it heading?
7. What can we do to make it go down?
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Driving the Mod Down
• A combination of:– Safety management– Claims management
• Long term risk management mindset
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Controllable Factor?
• What is controllable?
Your losses!
Your claims dollars help determine your workers’ compensation premium in future years
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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
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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, SmartDrive and “1-800 How’s My Driving” programs, at least annual driver shadowing etc.)
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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.
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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.