As you’ve probably heard by now, NCCI is changing the primary-excess split point value in the experience rating formula beginning in 2013. I’ve been hearing from many agents and brokers who are wisely eager to understand this change and discuss it with their clients. We’ve already published several resources on this topic, and now we’re excited to announce that a new feature is available in ModMaster 5.0 to help you turn this change into an opportunity.
When you run a mod with a 2013 effective date, the calculation will not use the new split point unless 2013 rates for the applicable state(s) are published. Until then, you must use the Mod Projection feature in ModMaster to view the projected mod and/or print the 2013 Mod Projection Report. This functionality is also available for mods with 2012 effective dates.
First of all, how to find the 2013 Mod Projection feature and report
In the new ModMaster 5.0, this feature is found on the sidebar of the “Next Steps” screen. The link will only appear if your mod has an effective date on or after 1/1/2012. Once you click on the link, you’ll see on-screen a side-by-side comparison of the current mod summary values (the mod, expected losses, actual losses, etc.) with the estimated values for the 2013 projection. From there, you can request the “2013 Mod Projection Report” which repeats the on-screen summary and adds a graph and detailed information to help you fully analyze the estimated impact of the new split point value on individual losses.
When you should use this feature
I recommend you take at least a quick look at this screen for every 2012 and 2013 mod. Remember, according to NCCI data discussed further in this article, 36% of mods will see a shift of only plus or minus 2 points; another 38% will see a mod decrease from 2 to 5 points. Another 4% should expect to see an increase of 2 to 5 points. If your clients represent a typical distribution of industries and risks, 22% of them are likely to see what I see as a significant shift in their mod – that is, a mod that increases or decreases 5 points or more.
Based on the data and the client’s industry, I would then decide whether to print, analyze and discuss the 2013 projection with the client:
- For some clients, a mod change of a few points may not be something you want to discuss at length. But in some industries, such as construction, an increase of only a point or two can be significant if it eliminates a company’s eligibility to bid on work.
- For any client who is estimated to experience a significant increase in the mod, this is an opportunity to prepare them for possible bad news and to help them explore and recommit to the most appropriate loss control practices for their situation.
- For any client who is estimated to experience a significant decrease in the mod, this is an opportunity to share some good news, but remember…
The split point change produces one opportunity that applies to nearly all clients
As a result of the split point change, the minimum mod, or loss-free rating, in most cases will be dropping several points. This in turn will often drive up the controllable mod, thus producing a great opportunity for you to share your expertise, discuss loss control, and deliver recommended Broker Briefcase resources on safety, injury management, and more that are part of ModMaster 5.0.
Remember, the 2013 Mod Projection Report is an estimate
I want to emphasize that this feature is providing an ESTIMATE of the 2013 mod. This estimate uses the new split point (changed from $5,000 to $10,000) and an associated change to the discount ratios which NCCI estimates will be 50% higher. For these purposes, we are also assuming that the change will take effect for all states and the independent bureaus which use NCCI or similar rating methodology (excluding California), but a few states have yet to indicate their plans for this change.
As always, feel free to comment here or to email me at [email protected] with any questions.
– Kory Wells, WorkCompEdge Blog Editor
Last updated 6/12/2012
© 2011-2012 Zywave, Inc. All rights reserved. For reprint permission, contact the blog editor.
Further reading
News Regarding the 2013 Split Point Change (from NCCI and Independent Bureau States) 2/8/2012
NCCI Publishes FAQ on Split Point and Maximum Debit Mod Changes 8/8/2011
How Will Mods Change Under New NCCI Plan Recommendations? 8/2/2011
Login required for the following two resources:
- AgencyFuel article: A new way to sell with the mod.
- Broker Briefcase document “Work Comp Insights: NCCI Changes Primary-Excess Split Point for 2013.” Ideal for ModMaster users to share with clients and prospects.
All ModMaster users should have an AgencyFuel login – if you don’t, contact the Zywave Partner Service Center at [email protected] or 866.499.9283.
Kory:
I have been using the new Mod Projection with every and what I find is the projection reflects there being no change in the primary and excess losses, except for the higher split point, and does not take into consideration the inpact of the curent policy year losses and estimated payrolls as is the case in the MM 4.0 “Forecast a Future Mod.” I believe the Mod Projection in 5.o should provide users with the flexibility to “work forward” and input the actaul priomary and actual excess losses. This will provide what I feel is a “better” estimate of the split point change on the future mod.
Michael
Hi, Michael,
You are correct that the 2013 projection is using the exact same set of data as your 2012 mod calculation, except that we are:
– splitting all actual itemized losses at $10,000 instead of $5,000, and
– splitting excess losses based on a D-ratio adjusted by 50% from this year, per NCCI documentation
We felt it was important to show the estimated impact on the mod of ONLY this change in the rule, although of course in reality EVERYTHING will change from 2012 to 2013 – payroll, losses, rates AND the rules. However, I can certainly understand your interest in forecasting for everything you can. Although it’s not the most elegant solution, you might consider these steps:
– save or print the 2013 Projection report
– return to Next Steps and use the Formula Calculator to enter summary numbers from the 2013 projection
– then adjust actual and expected losses as desired to reflect your 2012 estimates
Another, better, option would be :
– Go ahead and rollover your 2012 mod file, changing to the 2013 effective date you anticipate
– Enter 2011 payroll and loss estimates in this new file as accurately as you have available at this time
– Calculate the mod. Note that the calculation itself will NOT use the new split point until 2013 rates are actually available, so the only exhibit that will be very accurate will be the 2013 Mod Projection report.
Once 2013 rates are released for the states included in your mod, then the mod calculation and full set of ModMaster exhibits should be accurate.
I hope that makes sense, and is helpful. If not, let me know and I’ll be glad to give you a call!
Thanks very much for checking in – I’m always glad to hear how folks are doing with the product, and how we can make anything about the ModMaster experience better.
Kind regards,
Kory
Kory:I have been using the new Mod Projection with every and what I find is the projection rftelces there being no change in the primary and excess losses, except for the higher split point, and does not take into consideration the inpact of the curent policy year losses and estimated payrolls as is the case in the MM 4.0 Forecast a Future Mod. I believe the Mod Projection in 5.o should provide users with the flexibility to work forward and input the actaul priomary and actual excess losses. This will provide what I feel is a better estimate of the split point change on the future mod.Michael
Hi, Michael,
Thanks for stopping by! One reason we implemented the projection as we did was so that it would be clear what the impact of ONLY the split point change (and associated D-ratio change) would be on a mod. This is meaningful for 2012 mods to be able to say “if the new rules were in place now, with nothing else changing, your mod would change an estimated x points.” To estimate a 2013 mod, you are right – there’s not a forecast feature like 4.0 had to put in only anticipated totals. Instead you need to make a new mod effective in 2013 (either through a rollover or just by entering the data) and then use the Mod Projection function (until 2013 rates are published). Admittedly, you need to have most of your detailed loss and payroll data to do this. I’ll keep your interest for the Forecast-type function in mind as we move forward into 2014 and beyond as the split point continues to change!
Kind regards,
Kory