As a dedicated commercial property and casualty insurance agent with Integrity Insurance Group in Arizona, I understand the complexities of workers’ compensation insurance. A critical aspect of this for many businesses, especially in the construction and oil and gas industries, is the experience modification factor (experience mod). The experience mod plays a pivotal role in the workers’ compensation insurance pricing and can even influence the bidding process for projects.
Understanding the Upcoming NCCI Changes
The National Council on Compensation Insurance (NCCI) oversees the workers’ compensation system in 36 states. Significant changes proposed for 2024 will affect every experience-rated risk. While NCCI describes these changes as “premium neutral” overall, they may not be neutral for every business. These changes are scheduled to be implemented starting November 1, 2023, in various states.
States with independent bureau systems, such as North Carolina, Michigan, Massachusetts, Minnesota, and Wisconsin, are currently assessing these changes. However, states like New York, Pennsylvania, Delaware, New Jersey, and California, along with states with state-run workers’ comp systems like Ohio, North Dakota, Wyoming, and Washington, will not be impacted by these NCCI changes.
Key Changes to the Experience Mod Calculation
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State-Specific Split Points: In a significant shift from the current system, the new methodology will set a unique split point for each state, reflecting the loss experience within that state. A split point is a threshold in the experience mod calculation, separating minor losses from major ones. The proposed values vary widely, from $9,500 in Oregon to $38,000 in Louisiana. This change could lead to lower or higher mods for businesses, depending on their claim history.
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Changes in State Accident Limitations: NCCI is revising the methodology to determine per-accident cost caps. These caps limit the financial impact of extremely costly injuries on the experience mod. The new approach will set these caps at the 95th percentile of lost-time claims in each state, significantly reducing the impact of major losses on the experience mod.
Impact on Businesses and Importance of Proactive Planning
The impact of these changes will vary by state, with estimates suggesting that more than 80% of risks will experience a mod change of 5 points or less. However, it’s crucial to note that individual businesses could see significant impacts, depending on their specific circumstances and claims history.
Why Engage with Your Insurance Agent Now?
It’s crucial for business owners to discuss these changes with their insurance agents. While precise predictions about the impact on your experience mod are challenging at this stage, understanding these changes is key to preparing for 2024. Proactive discussions can help in anticipating potential adjustments in your workers’ compensation premiums and strategizing accordingly.
The upcoming NCCI mod changes are complex, but staying informed is the first step in managing their impact on your business. As your insurance partner, Integrity Insurance Group is committed to guiding you through these changes. Reach out to us to discuss how these modifications might affect your workers’ compensation costs and ensure you are well-prepared for the changes ahead.
For more information please give us a call at 480-602-1616 or email patrick@integrityig.com
