Workers Comp has been rated by using the Experience Modification Factor since it began – well, in the 1930’s. If you search the J&L Risk Management website, you will see many articles on the E-Mod.
The E-Mod is a delayed system. You cannot tell actually what happened fully in any state with WC until 4 years after a policy commences. The aforementioned loss ratios are not designed to be a rating factor of any type. My actuarial background says no.
If your company is self insured, then the Loss Development Factor (LDF) reaches further into the past – up to 10 years. To say the Loss Ratio produces a premature measurement is a large understatement.
Therefore, as with ice cream and assaults, one should examine other intervening variables – LDF or E-Mod. Workers comp statistics can be great – with the right ones.
Article provided by James J Moore, AIC, MBA, ChFC, ARM. All articles are original content. Check out the full website at www.cutcompcosts.com
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