The National Council on Compensation Insurance (NCCI) has filed a “split point” change in their Workers Compensation experience modification rating. This change can significantly impact a business’ bottom line, by either increasing or decreasing a company’s rating over the next three years which will, in turn, affect business’ overall Workers Compensation premium. Businesses with poor loss experience will see an increase in their Experience Modification, while companies that have better loss experience will most likely benefit from this change.
Workers’ Compensation premiums are based on a calculation that includes payroll, the company’s classification rate, experience modification factor, schedule rating by the underwriter, and miscellaneous charges. The WC insurance premium will be affected by the Experience Modification. This factor is calculated by using a company’s claim history as compared to their classified payroll. NCCI’s current “split point” is that every claim of up to $5,000 goes directly into the experience modification calculation for the company. For claims in excess of $5,000 only a percent (up to 20%) is used. Beginning January 1, 2013 the “split-point” will double to $10,000 increase to $13,500 in 2014 and to $15,000 or more in 2015.
Experience modification credits and debits resulting from this change will be seen in most, if not all, businesses within the NCCI-controlled states. For businesses with credit modifications, this will be a good thing, but for businesses that rely on Experience Modification, this ruling could prove disastrous.
It is imperative that businesses take a hard look at their current experience modification and loss history now to determine what impact the NCCI change will have on their insurance premiums and, ultimately, the bottom line. It is more important than ever for a business to have a strategy in place to prevent incidents and aggressively manage claims that do occur. Proper claims handling and risk mitigation by an independent insurance and risk management consultant can affect you Experience Modification and help you reduce your WC insurance costs. To learn more on what measures you can take to reduce your businesses Workers’ Compensation costs, contact Albert Sica at 732.395.4251 or at [email protected].
