The Ticking Time Bomb for Plumbing and Mechanical Contractors: Lower Expected Loss Rates Can Mean Higher Experience Modifications

Author, Kevin Howard, CRIS, Account Executive, Rancho Mesa Insurance Services, Inc.

Bomb made of money

The Workers Compensation Insurance Rating Bureau (WCIRB) released the 2019 Expected Loss Rates (ELRs) in the 4th quarter of 2018. ELRs are the average rate at which losses for a classification are estimated to occur during an experience rating period. They are generally expressed as a ratio per $100 of payroll and can often have a dramatic impact on experience modifications. To support this point, the ELRs in the plumbing class code 5187 dropped 17% on January 1, 2019. This decrease is not getting significant attention, but could potentially create negative implications for California plumbing contractors and their respective experience modifications in 2019, 2020, and beyond. All plumbing and mechanical contractors should be made aware so they can prepare and make changes to protect themselves from the impact. Similar to a leak behind a wall, this could go undetected until the experience mods are released and then it is too late and too much damage has been done.


The lowered expected loss rates also impact primary thresholds. Your primary threshold is the maximum primary loss value for each individual worker’s compensation claim. If primary thresholds move lower, one small lost time claim can cause a significant spike in an experience modification. An elevated experience modification can impact not only pricing, but opportunities to bid certain types of work within the commercial sector.


If these terms are completely new to you and your organization, lean on your insurance broker to provide the education needed to get up to speed. That can start with building a detailed service plan that focuses on controlling your experience modification. Some examples of critical elements that should be discussed would include:

  • Addressing open reserves on claims that are impacting the future experience modification.

  • How the timing of the unit stat filing will affect the future experience mod and cost.

  • Ensuring that your safety program addresses the root cause of claim frequency and severity.

  • Trainings that are aligned with OSHA compliance.

  • Experience MOD forecasting up to 7 months prior to your firm’s effective date.


The ticking time bomb can be avoided by taking certain steps and actions that are strategically put in place with your insurance broker. If this article has created concern and/or these terms are brand new to you, pick up the phone and schedule an experience modification control meeting with an advisor from Rancho Mesa at (619) 937-0164. Their Best Practices approach to managing risk starts with a client-centric process that is focused on education and execution.