Big changes are coming to Worker’s Compensation and they are coming in a hurry. Changes that will cost you thousands of dollars, so it’s vital you prepare now.
What They’re Doing and Why
For the first time in more than 20 years, the National Council on Compensation Insurance (NCCI) has increased the primary/excess split point for the Experience Mod calculation. A part of the experience rating formula, the split point is the dollar value where a claim is divided between primary and excess loss amounts.
According to NCCI, the last split-point update occurred over two decades ago and since that time the average cost of a claim has tripled. Because of this, the portion of each claim that flows into the experience rating formula (Mod Calculation) at full value (Primary Loss) is much smaller than what it was some 20 years ago.
What It Means to You
Most, if not all, business people can agree that business costs in general have increased, so adjustments in insurance rates are understandable. However, what is good in theory is bad in practice when you look at the numbers.
For Experience Mods that are promulgated in 2012 for the 2013 year the split-point will be changed to $10,000, thus adversely affecting the Experience Mod. You must understand that the Experience Mod is calculated on a three year history; therefore, the 2013 Mod will go back in time and be rescored with the new split-point for all losses that occurred in the years 2009, 2010 and 2011.
What It Means to Your Average Business
For the average business, this means an instant increase in Worker’s Compensation premium, and, in most cases, an increase of thousands of dollars. For one of my clients, it will come to an instant increase in premium of approximately 40 percent.
The bad news doesn’t stop at $10,000; split-point increases continue:
Year New Split-point Years Claims Rescored 2014 $13,500 2010, 2011, 2012
2015 $17,000 2011, 2012, 2013
*Starting in 2016 and continuing each year after, the split-point will be readjusted according to inflation.
Forewarned is Forearmed
If you as a business owner are feeling surprised and, perhaps, a bit helpless right now, you’re not alone. The majority of business owners, HR professionals--and yes, even insurance agents--don’t know about these changes.
At Brown & Brown we understand. That’s why we’re here as your “Paul Revere.”
Just like Revere warned the American colonists when the British were coming, we’re warning business owners like you that these changes are coming. And not only are we warning you, but also are we arming you with the information you need to protect your business’ financial assets.
If you would like to know more about how the upcoming changes in Workers’ Compensation will affect your business, contact your Brown & Brown commercial representative.
Jeff R. Johnson
Brown & Brown of Kentucky