Experience Modifications:  Frequently Asked Questions...

 

If you have a general question about "Experience Modifications" that is not answered here,  please submit it to us and we will gladly get back to you with an answer.  

What is Experience Rating?

Experience rating is designed to reflect the individual differences in loss potential an insured.   While establishing class codes for various types of operations will give you an "average rate"  per manual rating, there is a further need to distinguish the differences between an insured that practices good loss control practices and, as a result has good experience and one that does not.

What is an Experience Modification?

In workers compensation experience rating, the actual payroll and loss data of the individual employer is analyzed over a period of time.  Usually, the latest available three years of data is compared to similarly grouped risks to calculate the experience modification. In general, an employer with better-than-average loss experience receives a credit, while an employer with worse-than-average experience carries a debit rating. Experience rating takes the average loss experience and modifies it based on the individual’s own loss experience.

 

The two primary benefits of experience rating are:

 

  • It tailors the cost prediction and final net premium cost to the individual employer more closely than does manual rating alone

  • It provides added incentives for loss reduction that are absent from manual rating alone

Who determines Experience Modifications?

While the premium and loss experience is collected by the various insurance companies writing workers' compensation, they report their data to The National Council on Compensation Insurance.  NCCI is the body that calculates the experience modification based on the information reported.

Why don’t I have a mod?

To be eligible for an experience modification rating within the State of Florida, the requirement for new business is that a firm must have workers’ compensation premiums of at least $10,000 the first year, average of $10,000 for the first two years.  or an average of at least $5,000 over a 3-year period.

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Roy E. Disney

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