In the fall of 2016, agents and insureds will start to see 2017 experience modifications. For some the new changes will mean lower experience modifications, but for many it will mean the same losses and payrolls will generate a much higher modification. There are two main changes that you need to aware of.
First, the $7,000 primary loss cap is going away. Instead you will be graded on a sliding scale based on your expected losses. If your total expected losses are under $8,910 then your cap is $4,500 per loss, but if your total expected losses are say $45,000, then your cap jumps up to $14,000 (double the previous). The cap sliding scale goes all the way up to $75,000 now.
For Example an insured has a 154% modification (already high) for 2016. Payrolls for the three years on the worksheet are $4,474,994, current actual primary losses are $33,514.00. If nothing changes the 2017 modification is estimated to be 189%. Why the increase? Because on the sliding scale the primary losses changed from $33,514 to $53,271 for the three year period due to the increase in the CAP.
This specific change is designed to give relief to an insured who has a single shock loss, but is not beneficial to an insured who has a frequency in losses.
Second, they are changing the modification calculation formula, the once very complicated formula is now being simplified. The WCIRB is taking your Actual Primary Losses adding it to the Expected Excess Losses and then dividing that total by the expected losses. (Ap+Ee)/E). The benefit to this is that it will be a lot easier to figure out how your experience modification is changing from one year to the next.
If you are concerned about the outlook of your 2017 experience modification, please feel free to reach out to your LBW representative and we will be happy to take a look at your 2016 modification and current loss information and advise you on what to expect in 2017.