Author, Greg Garcia, Account Executive, Rancho Mesa Insurance Services, Inc.
Every business owner understands the correlation between their Experience MOD (XMOD) and what they will pay in workers’ compensation premiums. When the XMOD increases, there is a good chance that the workers’ compensation rates or premiums will rise as well. This is why it is so crucial to really hone in on company safety procedures to limit work-related injuries as much as possible. The reality is that even the safest company that does everything the right way is going to run into a workers’ compensation claim from time to time.
So, when the inevitable workers’ compensation claim happens, what are you supposed to do? What impact will this have on the XMOD? The first component that business owners need to understand is that there is a cap to how much any single workers’ compensation claim can impact the XMOD. That cap is called the primary threshold. The primary threshold varies from company to company and is based off of the company’s payroll. The more payroll a company has the higher the primary threshold.
For this example, a company has a primary threshold of $15,000 where the maximum number of points that any one claim can impact the XMOD once reaching the threshold is 10 points. This means that a claim that costs $15,000 and a claim that cost $150,000 will have the same impact (10 points against the XMOD). However, this does not mean that claims that exceed the primary threshold can be disregarded, because the higher claim cost you have will impact your current and 5-year loss ratio (incurred claim cost/premium paid). Additionally, if a claim that was reserved higher than the primary threshold and can be closed or decreased lower than the primary threshold, XMOD points can be shaved off of that claim.
Knowing the importance of the primary threshold, we designed our proprietary the KPI dashboard that allows our clients to see their primary threshold number and corresponding maximum impact to the XMOD any one primary threshold claim would have.
If you have any questions about your XMOD or would like us to create a KPI for your company, please feel free to reach out to me at (619) 438-6905 or ggarcia@ranchomesa.com.