Wednesday, October 21, 2009

Comparing Two Workers Compensation Experience Mods

by Kory Wells, WorkCompEdge Blog Editor

Many of our readers have found themselves, at one time or another, in the unfortunate position of trying to explain why the workers compensation mod went up from the previous experience period. The possible culprits are numerous and have a lot of moving parts: changes in
  • expected loss rates,
  • payroll,
  • overall loss experience, or
  • the mix of loss types (frequency, severity and/or medical-only losses)
all contribute to a change in the mod. Of course, a change can be positive or negative depending on all the moving parts. Mod increases will occur, even if loss levels remain the same, if expected loss rates fall. Business owners don't expect to pay more in premium when their business is down, but it's definitely possible. So how do you get a handle on what exactly is influencing a mod - and premium costs - from one experience period to the next?

We know you already use ModMaster to calculate and analyze the experience mod calculation (What? You don't? Learn more about ModMaster now), so in the past you would've undoubtedly used one of our many reports - perhaps the Loss Analysis by Policy Period, for example - to help see what's happened with the mod from one rating effective date to the next. Still, that involved selecting the desired mod file and requesting the desired reports, then opening up the mod file for the previous experience period and requesting those reports. So much paper and time and looking back and forth from one page to another.

Find the new Mod Comparison report on the Reports and Graphs page of ModMaster.

But now (drum roll, please), that's all changed. The new Mod Comparison Report, available in ModMaster update 09.08 and later, produces a two-page report that shows critical information for both the current mod file and a second mod file of your choice. Here's how to use this report for best results:

1. First, let's say that you have the 2009 mod for Favorite Client already loaded into ModMaster. You're ready to put in data for the 2010 mod. Start by doing a File Utilities/Rollover of the Favorite Client 2009 to a new name, let's say Favorite Client 2010. This deletes the oldest policy year of data (in this case the 2005 policy year) and "scoots" all the other data over on the payroll and small loss pages so that the newest column is empty and awaits your data input.

2. Input payroll and loss data (either estimates or actuals, if you have the data) for the newest policy data into the Favorite Client 2010 file. This would be the 2008 policy period for our example. Also make any other adjustments to existing payroll or losses to match the bureau worksheet.

3. Calculate the mod. If there are no errors, then proceed to the Reports Menu.

4. You'll see that the Mod Comparison report is now a choice on the Reports Menu. When you click on this report and then click "Print Preview" or "Print Now," the following dialog appears:

Mod Comparison report dialog

5. Now, here's the important part: when you pull down the list of mod files, be sure to select the mod file for the same risk but only one year earlier. While ModMaster will attempt to compare any two files you indicate, this report is designed to compare mods that differ by one and only one experience period. If you try to compare other mods, unpredictable results may occur, as we say in the software business.

6. After you select the mod file to compare to, click the "Run Comparison" button, and something like the following will print or preview. (Click the report image to view the report as a pdf.)


Mod Comparison sample report, page 1

Mod Comparison report, page 2

At a glance, you can see how much the mod changed from year to year, but just as importantly, how much the minimum and controllable mods have changed. You can also see what's happened with the expected and actual losses: whether they've gone up or down, and what's happening with actual to expected ratios.

In this case, we can see that the mod went up, not only because expected losses were down but also because the actual losses which dropped out of the calculation were less than the actual losses which were added for the 2008 policy period.

The new Mod Comparison report is based on a user suggestion we greatly appreciate. We've already had a new suggestion from a different user that we should also list payroll totals, not just expected losses. Give the report a try today and let us know what you think!

Wednesday, October 7, 2009

Take Our Collateral Survey

by Kory Wells, WorkCompEdge Blog Editor

As a follow-up to Michelle Bradley's recent blog article "A 2009 Collateral Perspective," we've decided to conduct a survey of professionals currently involved in collateral issues related to self-funded workers compensation liabilities.

We invite insurance brokers, risk management consultants, and risk management staff of self-funded concerns to participate in the survey, which will be open through the month of October.

The goal of the survey is to assess, on a national basis, trends in collateral negotiations, exposures, reviews, arbitration, litigation, and other factors that SIGMA has seen with its own clients this year.

Our privacy policy: At the end of the survey, we ask you to register if you'd like us to share survey results directly with you. We'll also be posting at least some of the survey results on this blog and possibly in other venues. If you supply your email address, we'll also send you an invitation to join our newsletter list. We will NOT be sending any other emails or contacting you further, nor will we share your personal data with anyone else. Also, no personally identifiable information will be shared in any survey results we publish.

The survey takes about 5 minutes to complete, and (enticement alert) you get not one, but two, special free offers at the end. Take our collateral survey now.

We appreciate your participation!