Beginning in 2013, the National Council on Compensation Insurance is changing the formula used to calculate your business’ workers compensation insurance experience modification factor, called your experience mod, or just mod for short.  The results of these changes across all industries is designed to be revenue neutral overall, but taken one business entity at a time, this change will either be a win or a loss for you and your work comp insurance premiums.

So what is the change?  The formula is complicated and involves two parts, one designed to measure your actual primary loss costs against the expected loss costs for a business of your type and size and one to measure the excess losses against expected excess losses.  By far, the most impactful section of this formula is the section calculating your primary loss ratio.  As of today, this side of the formula only considers the first $5000 of each loss.  The remaining amount over $5000 is shifted to the excess loss side of the equation which has a much lower impact on the size of your mod.  The cut off for how much of a claim is considered in the primary loss cost is called the split point and has been set at $5000 for over 20 years.  Beginning with mod calculations in 2013, this split point is going to be increased steadily each year from $10,000 in 2013, to $13,500 in 2014 and on to $15,000 in 2014.  After that, the split point will be adjusted for inflation on a yearly basis.

So how do you calculate if this mod formula change is a winner or a loser for you and your business?  First you need to understand that for the 2013 mod calculation, the NCCI will be looking at your claims for the 2009, 2010, and 2011 policy years.  This is because the NCCI wants to give each claim enough time to settle and that leaves a big lag time in how a claim impacts your premiums.    Take a look at your loss history during those policy years and determine how many of those claims paid out more than $5000 for losses occurring during that time.  If all of your losses have a total payout of less than $5000, then you will likely see your experience mod factor fall to a lower number.  If, however, some of those losses exceeded $5000, then you will likely see an increase in your mod next year.

If your mod goes up, that can have two direct impacts on the amount of money you pay for workers compensation insurance.  The first impact is clear, your modification factor is a multiplier on your policy that increases or decreases your total premium to reflect the kind of loss experience you have had.  When your mod goes up, then so does your workers compensation costs.  But there is a more subtle effect as well.  Many workers compensation insurance companies use the mod factor as a quick way to decide which companies qualify for their best rates, and which need to go into their high risk programs which carry much higher underlying rates.  So an increasing mod may mean that you will have a harder time finding the low base rates for your policy that you may now be used to paying.

Going forward the winners in this new mod change process will be those companies that are able to keep their loss costs lower.  Since by 2015, every dollar of loss costs under $15,000 per loss will flow to the primary losses side of the equation, the part of the formula that can do you the most damage, then it is in your best interest to keep the overall costs of any accident as low as possible.  One of the best ways to do this is to choose a specialized workers compensation insurance company, one that writes only workers compensation insurance.  These companies generally have much stronger loss prevention programs that they can help you implement to keep losses from happening in the first place.  They also tend to have stronger programs to reduce medical fraud and employee fraud as well as programs to get your employee back to work sooner.   All of these techniques have been proven to reduce overall loss costs and now that means a lot more to you than it used to mean.

At Clinard Insurance Group, we help hundreds of small businesses all across North Carolina, South Carolina, Georgia and Tennessee with their workers compensation insurance needs.  We can help you evaluate the impact of these mod changes to you and help you find an insurance carrier that can help you keep your future loss costs lower and thus save you money not just today but year after year in the future as well.  If you would like our help with your workers compensation insurance, please call us, toll free, at 877-687-7557.

Personal umbrella insurance policies are perhaps the most underutilized insurance product for families in the United States.  This is an understandable result as most insurance buyers are usually more focused on cutting costs than they are on buying asset protection. In addition, many agents have been slow to make this an important policy to discuss when going over personal insurance issues with their clients.   But the truth is that most families have several reasons for needing a personal umbrella policy that have occurred over time and the decision at any one time not to buy this important protection does not mean that you will never need it.

Let’s take a quick look at what a personal umbrella policy is designed to do for you.  Umbrella policies are insurance policies that provide an extra layer of liability protection over and above your personal auto insurance policy and your homeowners insurance policy.   Most umbrella policies start with a minimum liability limit of $1,000,000 but you can usually purchase limits on up to 5 or 10 million if that is what you want or need.

One determinant of your need for this kind of protection can be where you live.  Those who live closer to metropolitan areas or areas where there are more wealthy people are at greater risk of being the target of a lawsuit.  Ask any injury attorney out there if you should buy an umbrella policy, I doubt any of them would say no.  The troubled economy of the past few years has also increased the number of people who are willing to sue you for mistakes that you may have made on the road.  If you cause an accident and injure someone who has recently lost his or her job, or who may feel that his or her job is not secure, then you are now dealing with someone who has good reason to hire counsel to try and get as much as they can from you while they have a chance.

Changes in your life over time also can be big drivers of the need for an umbrella policy.  Many families over time will experience both an increase in asset exposure and risk exposure.  Let’s take a look at them one at a time.

Asset exposure is simply the increase in the number and value of your assets over time that makes you a juicier target for a lawsuit.  Most kids out of college have very few assets to lose.  This is often a time in life when they select their auto insurance and perhaps even home insurance agent.  Many may never change agents and they may not undertake a review of their policies for years and years.  Over time though, they will accumulate assets that exceed the amount of insurance protection that they have on their auto and home insurance policies.  Without proper updates, and perhaps the purchase of an umbrella policy, these families may be unaware that they are now putting up their equity in their home and their future earnings and perhaps even their retirement accounts as protection against a bad auto accident.  Buying an umbrella policy for a few hundred dollars a year would be a much better choice for them.

Increased risk exposure can also slip into a family’s life without them being aware of it.  The best example of this is the day your teenager gets his or her license.  Now you have a driver with very little experience out on the roads with a car in your name and all of your assets on the line if they make a mistake.  Imagine your 16 year old reading a text while hurtling down the highway at 70 miles per hour.  This little scenario could really change your financial situation for the rest of your life if you haven’t prepared for it with an umbrella policy.  I know when my first child turned 16, I doubled the limit on my personal umbrella policy that day.

If your personal insurance portfolio does not include a personal umbrella policy, then please call our office today at 877-687-7557.  We will be happy to help you analyze your needs and help you find the umbrella policy that leaves you with a feeling of comfort about the safety of your hard earned assets.