Experience ratings, which rate companies based on accident history, serve as an effective incentive for California employers to provide safe workplaces, according to a study by the Workers’ Compensation Insurance Rating Bureau.
“Newly rated employers tend to have a greater decline in claims rates in the three years following their first X-mod than similarly sized employers in the same industry that do not become experience rated,” the WCIRB said. “The results indicate an effect of the initial experience rating qualification that is targeted in line with the intended incentive of experience rating to improve workplace safety.”
The WCIRB also said it found a statistically significant reduction in future claim rates when an employer̵
7;s experience modification, or X-mod, changes from a credit to a debit.Experience ratings are a merit-based system primarily aimed at creating a financial incentive for safe workplaces, the WCIRB said. Experience changes compare the claims history of an employer to the average expected claims history of companies of similar size in the same industry. An X-mod less than 100%—a credit—indicates a better-than-average experience, while a mod greater than 100%, or a debit, indicates a worse-than-average experience. A credit mod usually reduces the premiums charged to an employer while a debit tends to increase workers’ compensation costs.
WorkCompCentral is a sister magazine to Business Insurance. More stories here.
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