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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:. Establish common, practical knowledge about Experience Modification Factors.

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Presented by Steve McCarty, CSP Risk Control Specialist PMA Companies

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  1. Understanding the Experience Modification Factor Presented by Steve McCarty, CSP Risk Control Specialist PMA Companies

  2. 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.

  3. 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?

  4. Experience Modification – The Basics • Also known as EMF, X-Mod or Mod • Based on 3 Year Loss History* 07 08 11 09 10 12

  5. Where Do Exp Mods Come From? Rating Bureaus • NCCI • Certain State Rating Bureaus • Pennsylvania • Delaware • New Jersey • + more

  6. NCCI State Map

  7. Why Are Exp Mods Important? • Ability to Obtain work • Premium Calculator (Manual rates are multiplied by the Mod)

  8. 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

  9. 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

  10. Developing Your Mod NCCI compares: your actual losses (3 yrs) tothe expected losses in the class over a three year period = Your Exp Mod

  11. Example: $100,000 annual manual premium • DEBIT (1.5 = $150,000) •  • Base (1.00 = $100,000) •  • CREDIT (0.50 = $50,000)

  12. Sales Required to Pay for a Debit Mod If your company profit margin is:

  13. 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

  14. 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

  15. 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?

  16. Driving the Mod Down • A combination of: • Safety management • Claims management • Long term risk management mindset

  17. Controllable Factor? • What is controllable? Your losses! Your claims dollars help determine your workers’ compensation premium in future years

  18. 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

  19. 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.)

  20. 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.

  21. 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.

  22. Contact Information for Steve McCarty: Phone: (410) 527-3212 E-mail: steve_mccarty@pmagroup.com

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