Part 1: Foundational Definitions
In this section of the book, you will learn the fundamentals of the experience mod and formula including:
- Good / Bad mod examples
- Frequency and Severity Impact
- Split Rating
- Calculating the Minimum Mod
- Experience Rating Formula Definitions
Part 2: The Mod Formula and the Relationship of the Numbers
While the experience mod formula can be confusing and complicated, understanding the equation is not nearly as important as comprehending the relationship of the numbers.
This section is set up in a mock quiz format and will cover examples of how changes in claim cost inputs affect the final experience mod.
- What happens to the mod if:
- Actual incurred losses (H) decrease or increase?
- Actual incurred losses (H) stay the same & actual primary losses (I) increase?
- Actual incurred losses (H) stay the same & actual primary losses (I) increase
at a small company with a smaller Wt value?
- Actual incurred losses stay the same, and payroll increases?
- A company fraudulently uses a lower-priced class code to save money on
their workers’ comp premium, and actual incurred losses stay the same?
Part 3: Leverage the Experience Mod to Lower Work Comp Costs
The largest benefit of understanding the experience modification factor formula for employers and service providers is knowing how to leverage the numbers to lower workers’ comp costs. This section covers practical, how-to steps to drive positive results including:
- The multiplier effect
- Experience Rating Adjustment (ERA)
- Net vs. Gross Deductible
- Minimum & Controllable Mod Calculations with Work Comp Metrics
- Unit Statistical Date
