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Experience Modification Rating

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RECORDKEEPING  It's new, it's improved and it's easier

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Aerial Lifts Safety Tips

Electrical Safety

Experience Modification Rating

Understanding your experience modification rating and monitoring it regularly is paramount to reducing your Workers’ Compensation costs. It is also an excellent measure of how your loss prevention and control practices stack up to others in your industry.

Companies who effectively manage their Safety Programs not only understand how this works but also have assigned someone to monitor this on a regular basis. It has a direct correlation to how much you pay in Workers’ Compensation Premiums.

What is an Experience Modification Rating?

The Experience Modification Rating compares your workers’ compensation claims experience to other employers of similar size operating in the same type of business. Most employers who have an annual premium in excess of $3,000 will receive an Experience Modification Rating.

Your Experience Modification Rating is calculated by the National Council on Compensation Insurance (NCCI) or in some states an independent agency. Your independent insurance agent can advise you where yours is calculated.

How Is Workers Compensation Experience Rating Administered?

All insurance companies provide their reported losses and payrolls in a common format and at scheduled times to a licensed statistical agent such as the National Council on Compensation or The North Carolina Rate Bureau. This allows for all the losses and payrolls of a business to be used in the experience rating process, even if different insurers provided coverage during the experience rating period. Experience modifications are calculated by the approved rating organization and delivered to the insurer of each business.

What Time Period is Used in Workers Compensation Experience Rating?

The experience period is usually three full policy years, ending one year prior to the effective date of the modification. To illustrate, a modification effective January 1, 2005 uses payrolls and losses for the policies effective January 1, 2001; January 1, 2002; and January 1, 2003. The length of the experience rating period may be as little as one year or as great as three years and nine months, depending on how long the insured has been in business and whether policies have been issued for a coverage period different than a full year.

How Does the Experience Rating Formula Work?

The experience rating modification is affected by small losses more than by large ones because small losses are more frequent and predictable than large losses. The portions of all losses that are less than $5000, which are termed “primary losses”, have the greatest influence in determining the experience modification. Losses in excess of $5,000 are capped at levels that vary by state. To illustrate, single claimant losses in North Carolina were capped at $131,000 and multi-claim accidents were capped at $262,000 in April 2004. The amounts of each loss over $5,000 and below the cap are termed “ratable excess losses” and given increasing importance in experience rating for larger employers based on the level of their expected losses.

What Is the Best Way for an Employer to Favorably Influence an Experience Modification Factor?

Remember that losses remain in the experience rating formula for three years and that the experience modification is influenced more by small frequent losses than by large, infrequent ones. Thus, the short answer is to implement and sustain a comprehensive workplace safety program. Effective self-inspection program and accident investigation programs are particularly pertinent to managing claim frequency. Key Risk’s Loss Control professionals are available to help employers to establish these programs.

It is also advisable to not use subcontractors that do not have their own workers compensation insurance. Losses developed from uninsured subcontractors’ work are reported as experience of the primary contractor or principal

How Does Experience Rating Apply to an Employer With Exposures in Multiple States?

The National Council on Compensation Insurance administers an interstate experience rating plan. All jurisdictions are included except for California, Delaware, Michigan, New Jersey and Pennsylvania. To qualify, an employer must be subject to intrastate experience rating in at least one jurisdiction and have premiums in another jurisdiction that is included in the interstate plan.

Where do I find my Experience Modification Rating?

Typically you will receive an Experience Modification Rating Sheet each year prior to your policy renewal date. If you are unclear of your companies current Experience Modification Rating your insurance agent can help you locate this. Your Experience Modification Rating is also listed on the declarations pages of your workers’ compensation policy.

How do I learn more about the Experience Modification Rating Formula?

The National Council on Compensation Insurance (NCCI) has published a booklet entitled “ABCs of Experience Rating”. It is available on their website at www.ncci.com. This brochure explains the experience rating plan in greater detail. Many states that use independent agencies to calculate the experience modification also have prepared brochures to explain the Experience Modification Rating Process.

• Train, evaluate and certify all operators to ensure that they can operate forklifts safely;
• Do not allow anyone under 18 years old to operate a forklift;
• Properly maintain haulage equipment, including tires;
• Before using a forklift, examine it for hazardous conditions which would make it unsafe to operate;
• Follow safe procedures for picking up, putting down and stacking loads;
• Drive safely, never exceeding 5 mph and slow down in congested areas or those with slippery surfaces;
• Ensure that the operator wears a seatbelt installed by the manufacturer;
• Never drive up to a person standing in front of a fixed object such as a wall or stacked materials;
• Prohibit stunt driving and horseplay;
• Do not handle loads that are heavier than the weight capacity of the forklift;
• Remove unsafe or defective trucks from service until the defect is properly repaired;
• Maintain sufficiently safe clearances for aisles and at loading docks or passages where forklifts are used;
• Ensure adequate ventilation either by opened doors/windows or using a ventilation system to provide enough fresh air to keep concentrations of noxious gases from engine exhaust below acceptable limits;
• Provide covers and/or guardrails to protect workers from the hazards of open pits, tanks, vats and ditches;
• Train employees on the hazards associated with the combustion byproducts of forklift operation, such as carbon monoxide.

Portable Ladder Safety Tips

RECORDKEEPING It's new, it's improved, and it's easier

Employers now have a new system for tracking workplace injuries and illnesses. OSHA's new recordkeeping log is easier to understand and to use. Written in plain language using a question and answer format, the revised recordkeeping rule answers questions about recording occupational injuries and illnesses and explains how to classify particular cases. Flowcharts and checklists make it easier to follow the recordkeeping requirements.