Our experience mod is above the prequalification cut-off. What can be fixed, and how fast?
By the Rayon research desk · Last reviewed
Errors in the data can be corrected within one rating cycle, but the claims history itself takes years to roll off. The experience mod compares your actual losses with what is expected for a firm of your size and class over about three policy years, so a bad year stays in the calculation for three ratings.
What is the experience mod?
The experience modification is a multiplier applied to your workers compensation premium. A mod of 1.00 means your losses match what is expected for your payroll and class codes. Below 1.00 is a credit; above it is a surcharge. For an electrical or mechanical contractor, workers compensation is usually the largest line of insurance, so the mod moves more premium than any liability rate.
It is calculated by a rating bureau (NCCI in most states, an independent bureau in others) from payroll and loss data your insurers report. The experience period is generally three policy years, leaving out the most recent one.
Why do general contractors ask for it?
The mod is the one safety number that is calculated the same way for every contractor, so owners and general contractors use it as a screen. Prequalification forms commonly set a maximum, and a trade above it may be excluded from bidding or asked for a written explanation.
What can be fixed quickly?
- Wrong payroll or class codes on the worksheet. Under-reported payroll makes your losses look worse than they are.
- Claims that belong to another employer, or duplicated claims.
- Open claims with reserves that are higher than the claim now warrants. Ask the insurer to review reserves before the data is reported to the bureau.
- Claims closed for less than the amount still showing.
What takes years?
| Lever | Why it helps | When it shows |
|---|---|---|
| Fewer claims | The formula weighs claim frequency more heavily than one large claim | As each new year enters the experience period |
| Return-to-work programs | Shorter lost time lowers the cost of each claim | On claims still open, at the next reporting date |
| Reporting small injuries as medical-only | In most NCCI states medical-only claims are heavily discounted in the formula | At the next rating |
| An old bad year dropping out | It leaves the three-year window | Up to three ratings after the year in question |
What do I do this week?
- Get your current experience rating worksheet from your broker or the bureau.
- Check every payroll figure and every claim against your own records.
- Ask when your data is next valued and reported, and get reserve reviews done before that date.
- If you are over a prequalification limit, prepare a short letter that explains the cause and what has changed.
Sources
- NCCI, ABCs of Experience Rating
- NCCI WC 00 00 00 C, Workers Compensation and Employers Liability Insurance Policy
General information, not legal advice or an interpretation of your policy. Policy forms and endorsements control. Form numbers are © Insurance Services Office, Inc. and are cited for reference.