The E-Mod multiplier increases or decreases the amount of premium to be paid during each policy period.

What is an Experience Modifier?

The Experience Rating Plan (E-Mod) is a multiplier for each employer based on risk classification, payroll, and loss experience.

• The fewer claims you have, the lower your experience modifier will be.

The Experience Modifier(E-Mod) refers to your claims “experience” and builds your claims history into the calculation of premiums.

The more claims you have, the higher your experience modifier rate will be.

The E-Mod Multiplier is calculated every policy year and is

used in the premium calculation for that

year

THE EXPERIENCE MODIFICATION FACTOR

HOW DOES IT WORK?

Premium Mod Modified Premium$100,000 x 0.75 = $75,000

$100,000 x 1.00 = $100,000

$100,000 x 1.25 = $125,000

• For example, a policy period of • 1-1-13 to 1-1-14• Use the claims data from policy years

effective 2009, 2010, 2011 • They are the last three completed years

before the current policy period.

The claims data used to calculate your E-Mod rate consists of three completed years of claims experience.

Policies with an annual subject premium of at least $4,500 is subject to E-mod rating for South Carolina

Who Qualifies for E-Mods?

Experience Modification Formula

=

Actual Primary LossesExpected Primary Losses

TERMSActual Primary Losses: • Actual Losses up to $5,000 per claim. • Reflects claim frequency. • For each loss equal to or less than $5,000, the entire amount is

used• For each loss over $5,000, the primary value is $5,000. • For medical only losses, the primary value will be reduced by

70%.

Actual Excess Losses: The amount of each loss in excess of $5,000 per claim

Example:Claimant Claim Value Actual Primary Actual ExcessBrad Paisley $15,000 $5,000 $10,000

TERMSExpected Losses : Based on PayrollPayroll put in Class CodesClass Codes Assigned Expected Loss Rate

Expected Losses are obtained by multiplying the *Expected Loss Rate by the payroll Amount (Divided by $100) in each Class Code.

Expected Primary Losses: These are obtained by multiplying the Expected Losses by the Discount Ratio for each Class Code

Expected Excess Losses: Are obtained by subtracting the Expected Primary Losses from the Expected Losses.

ACTUAL PRIMARY LOSSES-EXAMPLE

Based on Claims LossesAgency: ABC Law EnforcementLoss History:

 

Policy Year Claimant DOA Claim

Amount Claim Type

2009 Christine Cagney 7/1/2009 $3,000 Medical Only2009 Angus MacGyver 10/1/2009 $7,000 Medical Only2010 Danny Williams 2/1/2010 $5,000 Indemnity2010 Steve McGarrett 5/1/2010 $1,000 Medical Only2011 Joe Friday 6/15/2011 $20,000 Med + Indem

Total     $36,000  

ACTUAL PRIMARY /EXCESS LOSSES ABC LAW ENFORCEMENT

Policy Year

Claimant Claim Paid Claim Type

Discount-Med Only(-70%)

Actual Primary Loss

Actual Excess Loss

2009 Christine Cagney

$3,000 Med Only

$900 $900 $0

2009 Angus MacGyver

$7,000 Med Only

$210 $2,100 $0

2009 Danny Williams

$5,000 Indemnity

$5,000 $5,000 $0

2010 Steve McGarrett

$1,000 Med Only

$300 $300 $0

2011 Joe Friday $20,000 Med +Indem

$20,000 $5,000 $15,000

Totals $36,000 $26,410 $13,300 $15,000

EXPECTED LOSSES- (BASED ON PAYROLL) ABC LAW ENFORCEMENT

(1)Class Code 7720 Law Enforcement. Payroll Amount: $100,000 Expected Loss Ratio: 7720=1.85 * Discount Ratio 7720= 0.11*

Expected Losses-Class Code 7720 Police =($100,000/100) x 1.85 (ELR)=$1,850Expected Primary Losses for Class Code 7720Police $1,850 x 0.11 (D Ratio) =$203.50

*Table of Expected Losses

EXPECTED LOSSES -ABC LAW ENFORCEMENT

(2) Class Code 8810 Clerical.Payroll Amount: $30,000Expected LR 8810=0.17Discount Ratio 8810=0.14

Expected Losses for Class Code 8810 Clerical=($30,000/100)x 0.17 =$51.00Expected Primary Losses=$51.00 x 0.14= $7.14

EXPECTED LOSSESABC LAW ENFORCEMENT(3) Total Expected Losses= Class Code 7720Police = $1,850 + Class Code 8810 Clerical =$51.00 =$1,901.00 x 3

years=$5,703(4) Total Expected Primary LossesCode 7720 Police $203.50 + Code 8810 Clerical $7.14 =$210.64 x 3 years=

$631.92

E-MOD CALCULATION: ABC LAW ENFORCEMENT

Actual Primary Losses=$13,300Expected Primary Losses=$631.92 $13,300/$631.92= 21.04?

WHY IS THIS E-MOD SO HIGH?

E-Mod Formula = Actual Primary LossesExpected Primary Losses

TERMS

Ballast Value: A stabilizing element designed to limit the effect of any single loss on the E-Mod. The Ballast Value increases as Expected Losses increase. *Obtained from the Tables of Weighting and Ballast Values.

Weighting Value: A ratio that determines the percentage of excess losses in the E-Mod Formula.

The Weighting Value is between .04 and .80 which increases as Expected Losses increase.

*Obtained from the Tables of Weighting and Ballast Values.

Experience Modification Formula

Expected + Ballast + Weighting Value + (1 Minus Weighting Value) = Total BPrimary Value Times TimesLosses Expected Excess Losses Expected Excess Losses

Actual Weighting Value (1 Minus Weighting Value) Primary Ballast Times TimesLosses + Value + Actual Excess Losses + Expected Excess Losses = Total A

For experience modification, divide Total A by Total B; Round to two decimal places.

E-MOD CALCULATION -ABC LAW ENFORCEMENT

Ballast Value: $30,000Weighting Value: 0.05

Actual Primary Losses: $13,300Actual Excess Losses: $ 15,000(1 Minus Weighting Value): (1 - 0.05)Expected Primary Losses: $631.92Expected Excess Losses: $5,070

E-MOD CALCULATION ABC LAW ENFORCEMENT

With Stabilizing Factors (Weight Values & Ballast Values)

$13,300 + 30,000 + (0.05 x $15,000)+ (1 – 0.05) x $5,070

_________________________________________________ $631.92 + 30,000 + (0.05 x $5,071) + (1 – 0.05) x

$5,071

= 1.37 E-Mod Factor ! Premium= 10,000 x 1.37=$13,700

• The Formula only counts 30% of Medical-Only Claims

• It Also Caps Claims payments at the following limits:

• $299,500 Single Claims* • $599,000 Multiple Claims*

• * Effective 9-1-12

Limitations used in the E-Mod formula.

NCCI Changes to the E-Mod Split PointThe Split Point separates claims into primary and excess portions.

• Currently, this amount is $5,000.• The Split Point will be changed from $5,000 to $15,000 over

a 3 -year period.

• The First Year will be $10,000• The Second Year will be $13,500• The Third Year will be $15,000

• Subsequent year filings will adjust the split point based on inflation

Impact of Experience Rating Changes

• Overall, rating changes will be premium neutral statewide (Will not increase the premium statewide)

• Generally, employers with favorable loss experience should receive larger credits

• Employers with less than favorable loss experience should received larger debits

• For More Information, see NCCI Item E-1402, Circular CW-2011-05, and CIF-2011-14

Impact of Experience Rating Changes

In 26 of the 38 states where the plan has been approved…

– 62 percent would see their rates fall less than 5 percent.

-Another 11 percent realized decreases between 5 percent and 10 percent.

-Rates were unchanged for 4.5 percent of risks. Less than one in four would see a rate increase.

Source: Tony DiDonato,  director and senior actuary at the National Council on Compensation Insurance

For Questions or additional information, please contact NCCI’s Customer Service Center at: 1-800-NCCI-123 Customer_service@ncci.com

When are Changes Effective?

State Date ImplementedGeorgia 3-1-2013 North Carolina 4-1-2013South Carolina Approved-Date undecided

Questions?