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by Tommy Folsom on Aug 8, 2012

Here at LRA Insurance we are dedicated to being a leader in helping our clients and prospective clients to navigate the ever changing insurance rules.  

On 1/1/2013 the way your Experience Modification Rating Factor or (EMR) is calculated will change.  This will have an impact on everyone that has Worker's Compensation insurance as the EMR is a direct multiplier of your insurance premium.  Whether the impact is positive or negative can  only be told by a careful review of your mod sheets but we have the Workers Comp Specialists in our agency and unlimited resources dedicated to this area to ensure we provide you with expert knowledge to minimize you premiums.

The below is an overview of the NCCI proposed change that will begin 1/1/2013, how it will affect you and how our experts at LRA Insurance can help.

What And Why?

The NCCI approved rule change Item E 1402 changes the Primary/Excess Split Point Value.  This is the dollar value that splits a loss (claim) into its Primary and Excess portions in the mod calculation.  This method has not changed in over 20 years.  The average cost of a claim has gone from $2500 to $9000 since that time due to medical inflation.  Therefore, the calculation has become less responsive to the insured’s actual losses over time and this change will widen the gap between low risk and high risk insureds.

Change is NOT all Negative

This change will impact less than 35% of Insureds in a Negative way, meaning it will increase their EMR.  So, in turn this change will impact 65% of Insureds in a Positive way, decreasing their current EMR.  LRA Insurance wants to help guide you through this change because with expert advice you can control some of the impact of the change both positive and negative. 

The Change

Currently, the FIRST $5000 of each claim is given full weighted value in the EMR formula.  This dollar value will be increasing due to the increase in average claims cost.  The illustration below will show you the change.

                                Change In Split Point Value

Year          Actual Primary Split Point Value          3 Claims Years on EMR

1993-2012    =    $ 5000                                         2008-2010

2013             =    $ 10,000 + inflation formula           2009-2011

2014             =    $ 13,500 + inflation formula           2010-2012

2015             =    $ 15,000 + inflation formula           2011-2013

2016 -           =       inflation formula                         2012-2014 

Impact on you and how we can help!

Basically, you can see that the impact of how you manage your claims and your EMR today and the previous 3 years will impact you tomorrow and in 2013 when the rule takes effect.  If you have had too much claim activity in the past 3 years this could impact your EMR from 2-20 + % depending on the severity. However it is not too late, LRA Insurance has the tools and expert knowledge to help clean up your EMR.  We have been doing this on an annual review basis for all of our insureds and will continue to do so.  If you would like to see the impact on your EMR please contact us and our experts will review your NCCI worksheets with you.  There are rules in place that allow us to help clean up your EMR from 3 years back.  Only experts know this!

The Construction industry in particular could be hit hard for 2 reasons.  Construction class codes will be impacted greater because they are in the high risk category.  We see more and more Bid Contracts for our review that specify the contractor must have an EMR below a 1.0 which some believe is an indication of your Safety and Loss Control, this is actually a false indicator.  So if you are border line now with the new rule change there could be potential for a more negative impact on the survival of your business.  We want to help you!

Free Workers Comp Webinar

LRA Insurance will be holding a Free Webinar for Clients and Prospective Clients in Florida on 8/29/2012 at 1:00PM to help explain, in detail, the Split Point Value Change and its impact on your Experience Mod Rating Factor.  During this webinar we will review sample NCCI Mod Sheets with you.  If you would have your NCCI Mod sheet with you during the Webinar it may be helpful.  If you are a prospect and would like a free Experience Mod Consultation please contact our agency and we will assist you.  We will also give you the secrets to battle this change including but not limited to:

  • Understanding How Claims affect your EMR
  • Good Claims Management Practice
  • Implementing Return to Work Program
  • Proactive and Reactive Loss Control from Carrier, Agent and Insured     

If you are interested in attending our Webinar please click here to Register Now!.  We wish everyone the best in your business endeavors and look forward to hearing from you soon.  

Please look out for our Newsletters with more info or connect with us on Facebook, Twitter or Google+!   

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