In January of this year the National Council on Compensation Insurance (NCCI) changed the methodology of determining an individual employer’s experience modification factor. In a blog published in July of last year, we warned our Clients and Friends of the Firm about the upcoming change and significant impact it may have on their workers’ compensation premiums. In the same blog we explained how a company’s loss history will impact premiums for at least three (3) years after losses occur.
Those of you who heeded our warning and embraced the issues we surfaced in our blog, were prepared and worked hard to improve your loss profile. Activities such as analyzing your experience modification and loss history, as well as taking steps to employ proper claims management allowed for a more prepared approach for these changes.
However, those of you with a large number of claims (frequency), and in particular, with losses between $5,000 and $10,000, will find your company’s bottom line significantly impacted by inevitable increase in your experience modification and resultant workers compensation premiums.
Depending on the size of a company, experience modification and worker’s compensation premiums could increase from about 20% to as much as 60%. Experts predict smaller accounts will be more adversely impacted since even a few losses over a three-year time frame will be very difficult to overcome. Accounts in remote areas without good medical care may also be hurt. Additionally, a higher EMR can deeply impact your ability to win contracts, since many contracts call for EMRs at or lower than 1.0.
So, if you haven’t done so already, it is crucial for you to take the time and review your current experience modification, loss history, workers compensation audits and reserves. Did you do that already? Did you notice any large adjustments on your loss run?
Did you know that if a claim settles for significantly less than the cost of reserve, it may be too late to reduce your experience modification factor? Do you have proper claims handling process in place that will not only track them, but will expedite claim closure? Don’t count on your adjusters alone! It takes years before they become experts at reserving, so it is important to have someone with a good understanding and knowledge review your company’s reserves.
If you don’t know the answers to or your broker hasn’t asked any of these questions, you need an independent advisor on your side who will act as your dedicated “quarterback”. The ALS Group can be that “quarterback”. We will monitor your claims, implement proper claims handling procedures and work with your firm’s Senior Leadership to design and implement best practices that will promote safety in the workplace that will, ultimately, lead to reduction in claims.
If you need help with claims, workers compensation, safety or any other Human Capital risk issues, please feel free to contact me at 732.395.4251 or [email protected].
