Educational Series

Experience Rating
approx. duration: 3 hours
Instructor(s): Duane Schroeder, CPCU
Mari Smith
Frequency: semi-annually

I. Reasons for Experience Rating

A. Rate for risk
B. Gives employers influence on their final premium
C. Encourages workplace safety
D. Provides incentive for early return to work

II. Characteristics

A. Avg annual premium of $2,500, or $5,000 in one year
B. Mandatory application
C. Applies to all commonly owned entities
D. The larger the risk, the greater the credibility

III. Frequency v. severity

A. Common sense analysis
B. Impact on final modification

IV. Plan parameters

A. Experience period
B. Changes to anniversary rating date
C. Employee leasing exception

V. Unit Statistical data

A. The basis of experience rating
B. Filed by insurance carrier
C. Includes reserves
D. Valued at 18 months after inception, every 12 thereafter

VI. Experience Rating Components

A. Expected losses
B. D Ratio
C. Actual losses
D. Claim data
E. Injury code
F. Credibility factor
G. Ballast value

VII. Loss Limitations

A. State accident limitations
B. Primary vs. excess
C. Medical only losses (ERA)
D. Cap on final mod.

VIII. Changes in Experience Modifications

A. Changes resulting in decreases
B. Changes resulting in increases
C. Late issuance due to lack of employer cooperation
D. Retroactive reclassification of risk
E. Changes in ownership

IX. Availability of Ratings

A. Verbal mods
B. Worksheets
C. Letters of Authority
D. Fee schedule

Notes:
No single factor has a greater impact on the pricing of your clients' workers compensation premium than their Experience Rating Modification (mod). This seminar promotes an understanding of the factors that drive the modification, and the methodology behind the calculation. We explore eligibility thresholds, experience periods, and the impact of changes to anniversary rating dates. We explain the various types of modifications (Final, Contingent, Preliminary, & Split). We discuss the competing impacts of frequency vs. severity, especially as they relate to the affect of a single claim and multiple claims on the mod.