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WCIRB and You

WCIRB and You

It is an entity that is part of the insurance portfolio of every employer in California: the Workers Compensation Insurance Rating Bureau (WCIRB).  You may have heard about WCIRB from your broker, or the WCIRB may have been in contact with your business. How much do you really know about this agency? What They Are Every state has a way of assigning payroll classes, etc., much like the WCIRB. For the purposes of this article we are going to discuss the California WCIRB. The WCIRB is a nonprofit association comprised of all companies licensed for workers compensation transactions in the State of California.  The WCIRB works with the California Department of Insurance to perform many Workers Compensation Insurance related functions including: Using statistical and actuarial data to determine pure premium rates. Administering Workers Compensation regulations. Assist policyholders with employee classification. Produce and distribute experience modification factor worksheets. Reviews policy forms and endorsements. Advises the Cal-OSHA Targeted Inspection Program. WCIRB serves workers compensation policyholders in many different ways, but the two most important ones for business owners are experience modification factors and employee classification codes.  Here is how those work: The Mod Factor One way to modify pure premium on a work comp policy is through an experience modification factor. This factor is determined through a complicated mathematical process involving 5 years of claim data for a particular employer, including both frequency and severity of claims. Depending on frequency (number of claims) and severity (claims amount paid out) a modification factor of anywhere from 60% to 300% may be applied to the pure premium to determine the total cost of...
Why You Should Care About Your Mod Factor

Why You Should Care About Your Mod Factor

Workers Compensation Insurance is a necessary evil.  The state of California requires that businesses have Workers Compensation Insurance even if they only have one employee, so everyone should have it.  Federal law and other states laws may vary slightly, so check with your state or the Department of Labor for specific requirements. Workers Compensation Insurance rates are set by the state and based on the classification of your workers.  That means that all roofers pay the same rate per employee, all banks pay the same rate per employee, all sales offices pay the same rate per employee.  It might seem like there is no wiggle room for rates. There are a couple of factors that can affect your Workers Compensation Insurance rates, and the most important one is the Experience Modification Factor.  So what is this Experience Modification Factor (Mod), and why should you care about it? What the Mod Is The Experience Modification Factor is a complicated calculation that is based on the last three (3) years minus the current year of your workers compensation claims payouts to policy premium.  The factor is affected not only by the dollar amount of claims you have (severity) but also the number of claims you have in a given policy period (frequency). Your Mod Can Cost You Money The standard Mod is 1.0.  This means that when your policy premium is calculated, the premium is not affected by any modification factor. However, a high ratio of claims to premium can result in a higher Mod factor, above 1.0.  If there are very large claim payouts or a high number of small...