For renewals as of and after January 1, 2013 the methodology for calculating an “interstate” experience modification will be drastically changing. The bottom line is that those with poor experience are going to see drastic increases in their experience modification, while those with excellent history will see decreases. This is very important to all employers who have NCCI issued modification factors, but extremely important to the construction industry where sometimes you can’t get a job if your experience modification is over 1.00.

The change is a way to more accurately reflect in an experience modification the true cost of claims which have grown multiple times over the past few decades while the methodology hasn’t. The modifications will penalize those accounts with poor loss history, abysmal safety programs, and non-existent claim management and back to work programs. Conversely, It will help the modification factors of those who have good experience and actively work their safety, claim management and back to work programs.

What should you do in anticipation of this change in methodology? Well the first thing I would want to know is what will my modification look like under the new methodology? There are tools available, such as “Mod Master” for doing this. If you benefit from the change; great. If you don’t, then what? I would look into finding any errors in your existing claims information that could be corrected, however that is not always easy. Then I would make sure that I have the proper plans and procedures in place to ensure that moving forward I am taking necessary steps to minimize my claims experience.

I wouldn’t underestimate the potential impact of this methodology change on your costs, ability to get work and profit. Those who get out in front of its rollout and see how it will impact them will be the ones in a better position to use it to their advantage or will be ready to explain its adverse consequences.

If you are concerned about this coming change and how it may impact your business please don’t hesitate to contact me.

Sincerely,

Michael J. Regan
617-305-0346
mregan@clearyinsurance.com