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Employers Work Comp Insurance Carrier Punishes For A Good Experience Modification Rate

Updated: May 13

Employers Work Comp insurance carrier punished employer for a good Experience Modification Rate
Employers Work Comp insurance carrier punished employer for a good Experience Modification Rate

A Client's experience modification rate fell from a .98 to .80 at renewal. That should be great news! I happen to know this decrease was the result of a multi-year initiative which included enhanced safety training, elimination or mitigation of hazards, and the creation of a robust return to work program.

The oldest policy year on our client's expiring experience modification rating wasn't good and it was the last policy before the kick off of their claims reduction efforts. So, finally, this employers workers comp experience modification rating fully reflected (all 3 years' experience in the calculation) the new and improved safety organization. The employers insurance costs should have dropped substantially.

An employers workers comp premiums can be modified, and usually are, by Schedule Rating Modifications. These are either credits (reduced premium) or debits (additional premium). In the case of this employers work comp program, the existing debits were increased. The underwriter emailed the following explanation to broker about increasing schedule rating debits on renewal.

"However, given the drastic mod decrease, I still need to be able to sustain the loss pick and overall pricing of the account."

As if that's a bad thing. Sounds like punishment for improving claims and employee safety (reduced mod). While the employers workers comp experience modification rate fell 18 points, they didn't come close to achieving an 18% savings in premium. The cost of the employers insurance didn't benefit to the extent that, more than likely, the employers insurance carrier benefited from reduced claims expenses.

What Is An Employers Work Comp Schedule Rating?

If you look at any employers workers comp policy, you'll see a line item called Schedule Rating Factor (or Modification). And, all you will see is a percentage debit or credit. No detail. This IS a safety program. However, if you request the Schedule Rating Worksheets, you should see various safety categories, debit or credit percentages assigned to some of those categories, and an explanation of the basis for your ratings.

This subject (employers workers comp schedule rating) could alone be the subject of it's own blog post or multiple posts. But, fyi, we generally don't request these worksheets unless we see that this factor is going up year over year (additional premium) or bouncing around in a way that couldn't be explained by sharp, annual changes in safety practices.

Suffice to say that in the case of our client's Schedule Rating debit increase, it wasn't being applied as intended; an assessment of employers workers comp safety practices. It was just being used as a convenient pricing tool to maintain premium levels.

As I write this in August of 2023, we are in a multi-year decline in employer work comp rates. I wrote about different techniques Insurance Companies use to maintain premium and profit margins in another post; Does My Workers Comp Audit Refund Indicate That I Received A Fair Price? From that post here is another issue to watch for:


Beware Of The Work Comp Sleight Of Hand

Another issue for your renewal could be a close look at rates and your "underwriting company."

Why would an employers work comp premiums rise while claims fall?
Employers Work Comp Premiums Rise While Claims Fall

Is your carrier competitively priced? Has your account shifted from one of your carrier's lower-priced underwriting companies to a higher priced underwriting company? This is a common way workers comp carriers maintain the amount they charge in declining rate environments or when your experience modification rate calculation is falling.

Travelers, for example, has multiple underwriting companies (this isn't a complete list, but, rather, what I came up with off the top of my head!) each of which has different filed rates:

The Travelers Indemnity Company

  • The Travelers Indemnity Company of America

  • The Travelers Indemnity Company Of Connecticut

  • Travelers Casualty and Surety Company

  • Travelers Casualty Insurance Company of America

  • Travelers Property Casualty Company of America

  • etc.

I'm looking at a Missouri-based company's file right now (Travelers account) whose history is:

  • 19/20 Current Policy - The Travelers Indemnity Company Of Connecticut (most expensive of these 4 based on current filed MO rates)

  • 18/19 Last Year - The Travelers Indemnity Company (2nd most expensive of these 4 based on current filed MO rates)

  • 17/18 - The Travelers Indemnity Company of America (least expensive of these 4 based on current filed MO rates)

  • 16/17 - Travelers Property Casualty Company of America (3rd most expensive of these 4 based on current filed MO rates)

(Important: this is not a knock against Travelers. All insurance carriers do this because of state regulations that don't allow an individual insurance company to tier it's rates.)

So, this company probably has no idea (yet) that they've been bumped into progressively more expensive underwriting companies over the last 2 years. The work comp rate environment in Missouri, like the rest of the country, has been declining in recent years, but a business like this one has not enjoyed the benefit (at least not the full benefit).


These aren't the only reasons why your premiums may rise or remain flat while your employers work comp claims experience improves. If your workers compensation losses are falling in severity and/or frequency and your renewal quotes don't reflect this, it's time to investigate and ask questions.

Stuart Cytron, MBA has been published in trade journals such Construction Forum St. Louis and St. Louis Business Journal among others. You can read more about Stuart and how he developed a passion for helping businesses reduce work comp expenses on his website.

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