Experience Modification (X Mod) Rating is an indication of a healthy working environment. It tells insurance providers the risks involved when they consider you for Workers Comp Insurance.
In most states, NCCI is the publishing body responsible for computing the rating based on standards. However, there are states, including New York, California that don’t use the NCCI.
What are the important aspects of your X Mod rating that you should understand? How do you manage or decrease the rating?
X-Mod Calculation
The Workers’ Compensation Insurance Rating Bureau of California issues the standard for calculating x-mod rating in the state. This organization is non-profit and composed of more than 400 companies.
Often, the basis is a statistical comparison of losses (claims to insurance providers), payroll, discount ratio, and size of the business within a period. Here are three standard interpretations of the x-mod rating
- When your rating is equal to 1 (or 100% rating), your premium for workers’ compensation does not change.
- When your rating is over 1 (or above 100%), your premium for next year increases. This means you have claims that affect your insurance costs.
- When your rating is below 1 (or 99% and below), your premium decreases. This should be your aim to help in the reversal of the rising cost of workers’ compensation.
X-mod Rating Verification
Inaccuracy and errors could affect your premium, so you should always verify the Experience rating periodically. What errors could increase your rating?
- A difference between the expected and actual payroll amount might inflate your rating.
- Claims from almost similarly named businesses can erroneously be included in your records.
- Clerical errors in information could overstate your rating.
- Severity on claims before reporting can affect your x-mod.
- Verify all claims to make sure the provider is using the appropriate basis.
- Incorrect classification codes lead to incorrect ratings.
Ways to Reduce Your X-mod
The only way to maintain or reduce the insurance costs is to avoid claims on your workers’ compensation. However, you can control the reasons that could lead to insurance claims.
Through preventive measures, you can manage your X-mod rating, effectively and efficiently. Here are two broad categories that might be effective for claims prevention.
Risk Management
Effective reduction of insurance claims starts in your internal operation. Your business should hire competent and skilled individuals. When you have the right combination of skills and employees, provide them with proper benefits and a safe working environment.
If you can change ordinary office equipment and furniture with ergonomic ones, do so. Give benefits to employees who don’t have accidents for days or weeks.
Train your employees about OSHA safety. Alternatively, provide access to courses that discuss OSHA.
Lastly, implement a reporting procedure and investigation in case of accidents in the workplace. You must know how and when accidents occur so that you can implement ways to prevent them from occurring.
Claim Management
There would be cases that claims are inevitable. When this happens, make sure to become involved in managing claims. Evaluate the reasons, review the expenses, and implement a program as to how long an employee should be displaced due to the accident/injury.
Engage regular audits of workers’ compensation claims to determine employees who are deliberately putting themselves in danger.
Education and info drive are important aspects of implementation and operations. Through these methods, you can reduce possible losses due to medical expenses and opportunity costs because the employees couldn’t work.
Facts About Experience Modification Rate in the Different States
- Computation on Experience Modification Rate could vary from one state to another.
- The concept is the same throughout all states, but details may still vary during actual computations.
- X-mod rating is comparing the actual versus the expected claims.
- This rating determines the premium accurately and is useful to employers.
- The experience period is equivalent to four years, including the present year.
- EMR isn’t perfect, that’s why audit and verification are essentials.
Experience Mod Rating could be the industry standard in measuring the premium pay for your company. It involves the inclusion of many criteria to compute. When in doubt of your x-mod, consult an expert to verify the validity of the rating given to you. Remember, this rating affects your premium costs.
About Arroyo Insurance Services
Arroyo Insurance Services was officially established in 1986, but we have roots dating back to before 1950. One of California’s leading client-oriented and independently owned agencies, we have over 140 employees with a combined experience of over 450 years, spread across 11 locations. We are committed to providing the best insurance and risk management services at the most competitive premiums, and backing it with hands-on service tailored to our customers’ needs. For more information on how we can mitigate your risks, contact us today at (877) 220-4769.