Need Help Understanding the Basics of Your Experience Mod?
Posted by Debbi Kuhne on Wed, Jul 28, 2010 @ 09:36 AM
Totally confused about how your experience mod was developed? Trying to weed through formulas can be daunting and really unnecessary for the employer(you!) to understand the basics of how the experience mod is developed.
NCCI (National Council on Compensation Insurance) collects data from your Construction Insurance Carrier. This data consists of audited payroll for the 3 years prior to your current year, as well as claim amounts for the same time period. The claim amounts are incurred dollars (reserves plus amounts paid).
NCCI develops expected loss rates for each WC classification each January 1st. The rate is multiplied times your payroll and the final amount or expected loss amount is compared to your actual claim dollars. If your actual claim dollars exceed the expected your mod is in excess of 1.00, or a debit mod. If your actual claim dollars are less than the expected loss amount your mod is below 1.00, or is referred to as a credit mod.
In today’s economy many employers are reducing their workforce and thus payrolls are decreasing. If you maintain the same amount of incurred losses, but payrolls are reduced and therefore expected losses are reduced you will be seeing an increase in your mod. Unfortunately, many employers had that happen in 2010. We hope to see a stablizing of the expected loss rates in 2011, but since NCCI does not release those until December, it's anyones guess!
There are many more intricate parts to the actual calculation, but as long as you know the basic of “expected losses versus actual incurred losses” you should have a better understanding of the calculation.
If you're a Connecticut construction firm that needs experience mod help; whether it means reducing claims or making a plan to get your experience mod back down to below 1.00, Construction Risk Advisors can help. Our two full-time, in house claim advisors spend a combined 100 hours a week helping our construction clients achieve their minimum experience mod and in doing so achieve the best workers comp insurance rates possible. Give us a call at 800-252-9864 or drop us a line if you want to see how low your mod can go!