Industry News
The Impact of Claim Frequency and Severity on a Landscape Company’s Experience MODs
Author, Drew Garcia, Vice President, Landscape Group, Rancho Mesa Insurance Services, Inc.
The experience modification rate (ExMod or MOD) is a measure produced by insurance rating bureaus to summarize a company’s claim history versus their industry peers. A rating generated below 1.00 is considered a credit to the workers’ compensation policy while a number above 1.00 is a debit. The ExMod has a direct impact on the cost of workers’ compensation insurance.
Author, Drew Garcia, Vice President, Landscape Group, Rancho Mesa Insurance Services, Inc.
The experience modification rate (ExMod or MOD) is a measure produced by insurance rating bureaus to summarize a company’s claim history versus their industry peers. A rating generated below 1.00 is considered a credit to the workers’ compensation policy while a number above 1.00 is a debit. The ExMod has a direct impact on the cost of workers’ compensation insurance.
In exploring the impact of frequency and severity on the ExMod, it is important to understand a few terms.
Lowest Possible MOD = The best outcome for a company who has no claims in the experience window.
Unity MOD = 1.00 or the average against your industry
Actual MOD = Your final published ExMod.
In an effort to better display the impact of frequency and severity on the ExMod, in the following scenarios, we will use a three-year aggregate payroll of $3,000,000 a three-year aggregate claim cost of $55,000 and the lowest possible ExMod of 66.
Scenario 1
In this scenario, the landscape company had one $50,000 claim and one $5,000 claim. The actual ExMod was calculated at 93.
Scenario 2
In this scenario, the landscape company had five $10,000 claims and one $5,000 claim. The actual ExMod was calculated at 136. That is a 43% higher ExMod than in scenario 1, even though the total of all the claims were the same.
Both scenarios had identical payroll, claim value and lowest possible ExMod. The only difference was scenario 2 broke the $50,000 into five $10,000 claims. The ExMod was impacted more by frequency than severity.
It is a best practice to examine your ExMod and injury history for key trends to help identify areas where employees need more training.
Using Rancho Mesa’s SafetyOne™ platform, schedule both online trainings and regular toolbox talks from the mobile app to ensure employees are properly trained on safety within their job duties. These steps can help build a stronger safety program for the future.
For questions about best practices for managing your company’s experience mod, contact me at drewgarcia@ranchomesa.com or (619) 937-0200.
Contractors Brace for Impact of 2020 Expected Loss Rates
Author, Kevin Howard, CRIS, Account Executive, Rancho Mesa Insurance Services, Inc.
California contractors focused on their experience modification are paying close attention to the soon to be published 2020 Expected Loss Rates (ELRs).
Author, Kevin Howard, CRIS, Account Executive, Rancho Mesa Insurance Services, Inc.
California contractors focused on their experience modification are paying close attention to the soon to be published 2020 Expected Loss Rates (ELRs).
ELRs determine the expected claim cost per $100 in pay roll for each class code during an Experience Modification (Ex-Mod) period. These rates are updated annually. The 2020 rates were recently approved on September 5, 2019. Changes in each specific class code’s ELR can positively or negatively impact a contractor’s Ex-Mod calculation.
In a nutshell, if an expected loss rate drops from one year to another with no material changes to payroll or claims, Ex-Mod’s will increase. Additionally, if an expected loss rate increases, Ex-Mod’s will decrease using the same example.
Below is a breakdown of the 2020 ELRs per class code with notable double digit increases highlighted:
| Class Code | 2020 ELR | Increase/Decrease % |
|---|---|---|
| 3724 Solar/ Millwright | 1.74 | -4% |
| 5187 Plumbing > $28 | 1.18 | -8% |
| 5183 Plumbing < $28 | 2.6 | -5% |
| 5542 Sheet Metal > $27 | 1.40 | -4% |
| 5538 Sheet Metal < $27 | 2.30 | -12% |
| 6258 Foundation Prep | 2.65 | -3% |
| 0042 Landscape Gardening | 2.59 | -15% |
| 0106 Tree Pruning | 3.91 | -21% |
| 5140 Electrical Wiring > $23 | .81 | -6% |
| 5190 Electrical Wiring < $23 | 1.89 | +2% |
| 5470 Glaziers > $33 | 1.63 | +7% |
| 5467 Glaziers < $33 | 4.30 | -2% |
| 5028 Masonry > $28 | 2.17 | -9% |
| 5027 Masonry < $28 | 4.73 | -18% |
| 5482 Painting/ Waterproofing > $28 | 1.42 | -15% |
| 5474 Painting/ Waterproofing < $28 | 3.68 | -7% |
| 5186 Automatic Sprinkler Install > $29 | 1.11 | +5% |
| 5185 Automatic Sprinkler Install < $29 | 2.45 | -18% |
| 5205 Concrete/Cement work > $28 | 1.95 | -5% |
| 5201 Concrete/Cement work < $28 | 3.95 | -4% |
| 5432 Carpentry > $35 | 2.01 | -7% |
| 5403 Carpentry < $35 | 5.27 | -9% |
| 5447 Wallboard Application > $36 | 1.34 | -12% |
| 5446 Wallboard Application < $36 | 2.76 | -21% |
| 5485 Plastering or Stucco >$32 | 2.66 | -6% |
| 5484 Plastering or Stucco < $32 | 4.78 | -27% |
| 5443 Lathing | 2.37 | -18% |
| 5553 Roofing > $27 | 3.90 | -14% |
| 5552 Roofing < $27 | 9.85 | -4% |
| 6220 Excavation/Grading > $34 | 1.24 | -24% |
| 6218 Excavation/Grading < $34 | 2.34 | -5% |
The data above shows that a majority of class codes will be seeing a decrease in ELRs which will cause higher Ex-Mods in many cases. That reality creates a heightened need for loss control, claim management and post claim strategies. If you are seeking a partner with the tools to address these needs, please reach out to Rancho Mesa Insurance and our team of professionals at (619) 438-6874.