Guide: workers' compensation
Workers' comp loss runs and the experience mod: how claims feed the number
An experience modification compares an employer's actual workers' compensation losses with the losses expected for its payroll and class codes, usually over about three policy years. The rating bureau calculates it from carrier-reported data. Loss runs are the carrier's claim-level record.
General information, not advice. This is not insurance, legal or financial advice. Requirements differ by carrier, state and market; follow the instructions of the market you are approaching.
In general terms
How the pieces connect
This guide is general. Many states use the NCCI plan, and several run their own bureau with its own rules, which change over time. Your bureau's manual and your mod worksheet are the authority.
- The bureau produces the mod from data that carriers report. In NCCI states, the first unit statistical report on a policy is valued 18 months after it starts, and later reports follow at 12-month intervals.
- The experience period is typically three policy years ending about a year before the mod's effective date, so the latest year is not yet in.
- Each claim's losses are usually split into a primary part and an excess part. Primary losses weigh more, so several small claims can matter as much as one large one. Large claims are limited, and many states count medical-only claims at a reduced weight. See paid, reserved and incurred.
- Payroll and class codes set the expected losses. A loss run usually shows neither.
Steps
How to use loss runs alongside a mod worksheet
The aim is to know what is behind the worksheet, not to recompute it.
- Get the mod worksheetRequest it from the bureau or through the carrier. Note the experience period and the valuation date used for each policy year.
- Get loss runs for the same policy yearsAsk whether the carrier can supply them valued as of those dates, and get a current one as well. If it cannot, expect differences.
- Match claim by claimCompare claim number, date of injury, claim type (lost-time or medical-only), indemnity, medical and recoveries.
- Explain each differenceValuation dates, recoveries, reserve changes, caps and expense treatment explain most of them. List what you cannot explain.
- Take unexplained items to the carrier firstThe carrier supplies the claim data, so start there. Bureau review processes and deadlines differ by state; check yours. This is not legal advice.
Reference
Loss run fields and the mod, in general
| Loss run field | How it can matter to the mod | What to check |
|---|---|---|
| Policy period and date of injury | Decides which policy year a claim is in, and whether that year is in the experience period | The claim sits in the right year |
| Claim type: lost-time or medical-only | Many states weigh medical-only claims less | The label is correct |
| Indemnity and medical paid | The actual losses reported | Both counted once, neither dropped |
| Reserve | An open claim is counted at paid plus reserve as valued | A reserve on a stale or closed claim |
| Recoveries | Subrogation or other recoveries may reduce reported losses | Whether the recovery was reported |
| Expense (ALAE) | Whether expense counts depends on the bureau's rules | Which total the worksheet uses |
| Class code | Assigns payroll and losses to a class | Loss runs often omit it; check the worksheet |
Pitfalls
What goes wrong
- Different valuation dates. The worksheet uses the bureau's valuation for each year, so a current loss run will differ even when nothing is wrong.
- Total incurred read as the bureau's figure. Expense treatment, caps and medical-only weighting change what the formula uses.
- A stale reserve. An old open claim carried at an early estimate can keep its figure high until the carrier reviews it. See open claims on a loss run.
- A closed claim that still shows a reserve. Ask the carrier which field is right.
- Predicting the mod from a loss run. The formula needs payroll by class and bureau parameters that a loss run does not carry.
The tool
How LossRun Pro helps
LossRun Pro reads workers' compensation loss runs that print indemnity and medical in separate columns and adds them into one Paid Loss figure, with a note naming the headings it added. The schedule keeps the combined figure, not the split, so go back to the PDF for that. It ties each policy period to the carrier's printed total, but it does not calculate or predict a mod, and the schedule has no class-code or payroll field. Try it on the loss run to Excel page. Free: 1 file per day, up to 10 pages, no account. Files over 10 pages are converted up to page 10 on the free allowance; a page code converts the whole file, up to 150 pages. See pricing.
FAQ
Questions about loss runs and the mod
What is an experience modification?
A factor that adjusts a workers' compensation premium up or down by comparing an employer's actual losses with the losses expected for similar employers. A mod of 1.00 generally means experience in line with expected.
Who calculates the mod?
The rating bureau for the state, such as NCCI or an independent state bureau, using data that carriers report. Neither the broker nor the loss run sets it.
How many years of losses go into the mod?
Typically three policy years, ending about a year before the mod's effective date, so the latest year is left out. Check the rules for your state.
Can I work out the mod from a loss run?
Not reliably. The calculation needs class payroll, expected loss rates and bureau parameters that a loss run does not carry. A loss run helps you check the claims behind the worksheet.
Why does my loss run not match the mod worksheet?
Most often because they were valued on different dates. Caps, medical-only weighting and expense treatment also change the figures the formula uses. See loss run valuation date.
How do I question a claim on the worksheet?
Start with the carrier, since it reports the claim data, and ask about the bureau's own review process for your state. Rules and deadlines differ. This is general information, not legal advice.