This is a great question, and one that our customers ask frequently. The experience rating modifier is the one area where an employer’s efforts can significantly reduce premium cost.

Experience rating is the interaction of claims management and insurance pricing. An organization that controls its losses also controls its experience modifier and ultimately is responsible for higher or lower premiums. Although the formula is quite complicated, an understanding of the basic components will assist you in minimizing the impact of losses.

The experience modification formula considers losses for a three-year period, excluding the current policy period. The “losses” are more than just the amount that has been actually paid out on a claim. They are the “incurred” losses, which also include the reserves that an insurance company adjuster has estimated the loss will pay out in the future, either in direct medical treatment or as indemnity payments to the injured worker while he or she is unable to return to work.

As an example, let’s consider that an experience modifier for a risk is being calculated during 2006 for a policy that will be written effective Jan. 1, 2007. Since the 2006 policy is not yet closed (expired), the loss data is not available. This one-year lag period allows the insurance company the time to close most claims and more accurately estimate the cost of the open claims that will continue for more than one year. The three years that the experience modification calculation is based on are the years that began in January 2003, January 2004 and January 2005.

In its simplest form, the experience rating calculation compares the actual losses for the individual employer with the expected losses for the average employer in the same industry and same state with the same amount of payroll.

An experience modifier of 1.00 represents an employer whose actual losses closely matched the expected losses for their business. If the actual losses were greater than the expected losses, the experience modifier would be greater than 1.00; conversely a modifier less than 1.00 means that actual losses were less than expected.

Since no two employers in the same industry will have the same claims histories, the experience modifier calculation is designed so that the employer with the greater claims pays more for workers’ compensation. Through this system, employers have a financial incentive to improve the safety of the workplace. The chart below shows the significant impact that the experience modifier has on the actual premium an employer pays for insurance:

The last aspect of the experience rating modifier that impacts the calculation is the frequency of claims. The formula places a higher penalty on an employer who has 10 injuries costing $5,000 each versus an employer who has one injury costing $50,000. Although the ultimate expense may be the same, the employer with one claim is considered a much better risk. A history of frequent losses normally implies there are poor safety standards in place and little management commitment to improving safety. In Texas, as in most states, large claims are “capped” so that the amount that exceeds the cap is not counted at all in the calculation. The current cap in Texas is $107,000. This capping process reduces the penalty to the employer when there are “shock” losses.

The examples below show the impact of losses on the experience modification calculation as well as the impact of frequency versus severity in the calculation.

 Remember, experience modifiers are not arbitrary numbers assigned by the insurance carrier; they are calculations based on the employer’s actual losses. You can reward yourself and your business by implementing safety programs that will reduce losses.

Lowering Your Health Insurance Bill

A health insurance policy is one of the most important tools to have if you want to live a long life. The easy and affordable access to preventative treatment that health insurance gives is vital to the early detection of many curable and treatable diseases. Health insurance also grants the ability to get emergency treatment after an accident or serious illness which can help stave off infection and complications that result in overall health deterioration.

One of the best things about health insurance is that you can adjust how much you spend on healthcare costs by taking a few specific steps, such as:

o    Eating healthy: A nutritious, well-balanced diet can help improve your health while reducing your likelihood of getting certain diseases.

o    Exercising: Like a good diet, exercise can help keep your health and weight in check.

o    Taking your medications: Your prescription medication is meant to help your body’s fight for wellness. It can improve your health and make your blood tests and diagnostic numbers  look better than they otherwise would.

o    Getting screened: Early detection of potential health problems can lead to early treatment—which can make the difference between life and death for some patients.

Not only do the above steps help your health, they also help to:

• Reduce your health insurance premiums: When the underwriters of your insurance policy look at your health history, they will see more positive information if you take the above steps than they would if you did not. This may allow you to fall under a less expensive premium category than you otherwise would.
• Reduce your out-of-pocket expenses: If you choose a policy with a deductible, then you have a potentially steep self-insurance responsibility. The healthier you are, and the earlier you detect health problems, the less money you may need to spend on medical treatments within your deductible.
• Continue your insurability: You have a better chance of remaining insurable if you keep your health in check. Without insurability, you could be required to pay all of your medical treatment costs out-of-pocket and without the benefit of insurer negotiated prices.

Your health is the most important asset that you have and protecting it with affordable health insurance is like icing on the cake when you also focus on preserving it through exercise, eating healthy, taking medications and early screening. If you’re curious about health insurance rates and how affordable a policy can be for you and your family, contact us and we’ll work through your options with you.

Contact us at (979) 268-1500 for a free Texas Health Insurance quote or visit our office.

When searching for cheap car insurance, it pays to know the facts. Don’t rely on your neighbor or co-worker for insurance information. Here are the truths every driver should know.

1. "No-fault insurance means it's not my fault!"

No-fault car insurance varies by state, but usually requires your car insurance company to pay medical expenses and lost wages for injuries due to a car accident, regardless of who is at fault.

"After an accident, no-fault insurance lets all parties get payment for their immediate medical needs while their insurance companies are deciding amongst themselves which company is going to pay for the accident," says Michael Petrarca, an assistant vice president at Amica Mutual Insurance Co. in Lincoln, R.I.

If you caused the wreck, it doesn't mean you're off the hook. The insurance companies will decide who's to blame, and that party would be responsible for repairs and other damages, he says.

2. "The color of my car affects my insurance rate."

Auto insurance companies set rates based on the safety features of a vehicle and how much it costs to repair or replace the vehicle (among other factors about the driver). But the color of the car doesn't factor into the premium, says Petrarca.

"Some makes and models generate more claims than others, and they're rated accordingly, but the color of a vehicle means nothing," he says.

3. "My friend borrowed my car, so he's responsible for damages."

If you give someone permission to drive your car and that person crashes, it will be your insurance – not your friend's policy – that covers the damages, says Rebecca Doran, a senior corporate underwriter with Amica.

"For a personal auto policy, the insurance is generally going to follow the car, and not the driver. So if I lend a vehicle to my brother, and he gets in an accident, it would go through my insurance company," she says.

However, if your car insurance coverage is maxed out, your friend's policy can be tapped for the remainder of damages, Doran says.

4. "My auto insurance company can cancel my policy at any time."

State regulations prohibit insurance companies from dropping you in the middle of your policy term unless the insurer has adequate grounds to do so, says Petrarca. Such grounds may include non-payment or fraud.

However, if you're paying your premiums on time and have a valid driver's license, you have little to worry about, he says.

"While there are reasons companies can cancel insurance policies, they can't necessarily do it at any time," he says.

5. "A more expensive car costs more to insure."

Car insurance companies look at the “loss history” of your vehicle – meaning how many claims they’ve paid on that model—along with how much it might cost to repair or replace your car, not its sales price, when determining how much to charge you for collision and comprehensive coverage.

In fact, some mid-priced vehicles may have higher insurance premiums if they have a high loss history and cost more to repair than expensive ones.

"A $30,000 sports car could have costlier claims than a $50,000 SUV, so the sports car could cost more to insure," says Sal Orso, an assistant vice president of casualty underwriting for Chartis Insurance's private client group in New York.

6. "I got a ticket, so my car insurance rates will skyrocket."

A ticket doesn't automatically mean an increase in rates, Doran says. In fact, if the ticket was minor and you have an otherwise clean record, your premium may not increase, she says.

"It depends on the situation, and how many infractions you've had in the recent past. Ask your insurance company if you're unsure," says Doran.

7. "I don't need comprehensive insurance for theft, because thieves don't steal old cars."

In reality, many criminals are attracted to older, trustworthy, popular vehicles, such as a Honda Accord or Toyota Camry, says Doran. Because of the popularity of these cars, there's a large demand for their parts. When thieves steal the cars, they can strip the parts and sell them, she says.

"On the other hand, if you steal a $70,000 Mercedes, there wouldn't be as much of a demand for the parts," Doran says.

8. "The laptop in my car is covered by my auto insurance policy."

Personal property, such as a laptop or cell phone, isn't covered under an auto insurance policy, says Petrarca. Those items might be covered by home insurance, but a claim would be subject to your deductible.

9. "I recently paid my insurance premium, so I won't need a new policy for my new car."

Whenever you buy a new car, your insurance company will have to issue a new policy, regardless of when you paid for the previous policy, says Dick Luedke, a spokesperson for State Farm Insurance in Bloomington, Ill.

10. "My personal auto insurance covers both my personal and business use of my car."

If you're hauling supplies or otherwise performing business duties in your vehicle, you have to insure your auto for business use, says Luedke.

(Source: Insurance.com)

Contact us at (979) 268-1500 for a free College Station auto insurance quote or visit our office.