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Industry Insights

Moore: Experience Mod Catastrophe

  • National

Every week, J&L Risk Management Consultants receives an employer inquiry on what is becoming a workers' comp experience mod catastrophe. Let us look at how it happened to many employers. 

James Moore

James Moore

The employers’ situations are striking similar. A similar article I published in 2017 on this subject is worth a look.

Contacts from insurance agents, hoping to assist their insured clients with avoiding this catastrophe, increased by at least 60% since 2015.

Let us look first at the three experience mod levels. They are:

  • Below 1.0 — credit mod, not a problem (green flag).
  • At 1.0 — neutral mod, yellow flag, on a watch list.
  • Above 1.0 — debit mod, red flag, loss of business.

An experience mod at its most basic compares highly similar businesses. Rating bureaus such as the National Council on Compensation Insurance, the Workers' Compensation Insurance Rating Bureau of California and the Pennsylvania Compensation Rating Bureau assign an experience mod to each employer’s business that is large enough to be rated. The mod becomes part of the premium calculation by an insurance carrier.

The unmentioned part

This procedure does not cover the unmentioned second part, which can turn out to be an experience mod catastrophe. Many risk managers for large corporations and governmental entities now look at the mod as a credit risk rating of sorts. Many risk managers I have spoken with on this subject started using the mod as part of the bidding process in 2010 or earlier.

I was able to assist a large portion of these clients by writing a mod analysis letter to the risk manager. The letter worked part of the time, but only if the projected mod was going to decrease to a neutral mod of 1.0 or lower.

Small to mid-sized contractors began looking more closely at the potential sub-contractor mods. The experience mod catastrophe risk has increased with smaller contractors.

If an employer’s mod increases to above 1.0, many employers will find themselves out in the cold on any type of bidding process. The experience mod catastrophe can occur in any state, even the monopolistic states. In other words, the difference in going from a .99 mod to a 1.01 mod is not just .02. The .02 increase can be seen as miles apart, not just a 2% increase. The experience mod catastrophe is now in play.

How do you turn it around?

The best way to turn your experience mod around is by becoming more safety-oriented.  Most insurance carriers have safety units that will provide your company with materials and suggestions. Almost all states have some type of safety assistance for a nominal fee.

This whole website has hundreds of articles on avoiding an experience mod catastrophe, including loss-run reviews, which can be a great place to start.

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at

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