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Works Compensation Form

Understanding Your Mod

As a business owner or financial manager, it is important to identify and understand every cost associated with doing business. Worker’s Compensation insurance cost can be several thousand dollars per employee.  Through a better understanding of the National Council on Compensation Insurance (NCCI) experience modification formula and the data that goes into the mod, you can better control your mod, reduce cost, and gain insight into your company’s operations.

The first step to achieving a lower mod is to understand how it is calculated and what is necessary to lower the mod. Loss frequency or severity over time may indicate problems in your operation that have not been identified.  Also, your experience mod worksheet may be the easiest way to “benchmark” your company against other companies with similar operations. There are certain numbers on the worksheet that can help you identify if your company is experiencing more frequent worker’s compensation claims or more severe losses than average.  A basic mod analysis of the following data can provide you with valuable information regarding your company’s performance:

  • Expected losses vs. actual losses
  • Expected primary losses vs. actual primary losses ( with new split points in place)
  • Expected excess losses vs. actual excess
  • Determination of the minimum mod
  • Determining the controllable mod
  • Ratio of actual to expected losses
  • Specific loss sensitivity
  • Aggregate loss sensitivity

Along with this analysis, it is important to check the accuracy of the payroll and loss data entered into the mod sheet. A review of your losses should be conducted at least 6 months prior to your effective date to see if any reserves can be taken down before unit stat cards are sent to NCCI. You should be aware if you are operating in states subject to Experience Rating Adjustment (ERA) as those states reduce medical only claims by 70 percent and may affect your claims management process.

Remember, a high experience modification may not only cost you thousands of insurance dollars but also the opportunity to bid on projects for some owners. At Insurance Associates, we help clients get a better understanding of their mod, and strive to get it as low as possible.

If you would like to learn more about the subject above, please contact Michael W. Howell, CPCU at 703.352.6482 or email at mhowell@insassoc.com

Information about the Author:  Mike has over thirty five years of insurance industry experience and began his career as a Marketing Representative for The Hartford Insurance Group in 1980.  Mike joined Insurance Associates in 1985, and currently serves as an Account Manager with a specialization in handling large construction accounts on loss sensitive programs.  Mike has received one of the industries most recognized designations, Chartered Property Casualty Underwriter, in 1990.  Mike graduated from George Washington University with a Bachelor of Science degree and earned MVP honors his senior year on his baseball team.  He is an avid golfer and enjoys competing in local amateur tournaments.

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