In a construction project, insurance costs, especially workers’ compensation, have a significant impact on the profitability of the contractor and their competitive price prices. One of the most powerful drivers of these costs is the modifier of experience, or ex mod for the short modification rating (or EMR-Experience). Contractors need to understand how the ex mod works in different forms of insurance programs, such as guaranteed cost and loss, so they can optimally manage the risk, maintain cost control and be competitive.
What is an experience modifier (ex mod)?
The ex Mod is a number that has developed the qualification offices (such as NCCI or other specific offices of the State) that quantifies the history of a contractor in the past compared to its industry and its size. The ex mod is an indicator of delay because it considers the experience of loss of three previous years (excluding the current exercise), and weighs more in the frequency of claim than gravity.
A modification of 1.00 is a reflection of the experience of loss in accordance with the industry. A modifier of less than 1.00 (for example, 0.85) reflects a better loss experience than average, that is, premium discounts, and thus reward safe contractors. A modifier of more than 1.00 (for example, 1.25) reflects a worse register than the average and involves surcharges and increased insurance premiums.
Guaranteed Cost Programs: Ex Mod is King
In a guaranteed cost insurance program, the premium is fixed at the beginning of the policy period and is not reviewed based on the losses of the contractor that year. The only type of adjustments at the end of the policy period are exposure -based adjustments. The ex Mod has a direct effect and a significant impact on the initial premium.
For example, if a contractor pays a manual premium of $ 100,000 and his ex mod is 0.85, the clean premium would be $ 85,000. This 15% discount can really be added, especially for the work bidding where insurance is taken into account in the offers.
As a result of this direct consequence, contractors of the guaranteed costs plan may be obtained to offer safe working conditions and maintain at least claims, both for short -term problems of security problems and to maintain their modes in control and future premiums at reasonable levels. In addition, project owners and general contractors use Ex Mod as a factor in removing most projects, so a high mod to prevent a contractor from being eligible for certain jobs.
Loss -sensitive programs: Real -time risk has priority
On the other hand, the programs sensitive to losses or large deductible and retrospective qualification contracts, make the premiums depend on the appearance of real -time losses during the period of policy. Contractors who are willing to withstand a higher risk to save costs use these programs.
Under this structure of the program, the mod plays a minimum role or not in the determination of the premium. Although insurers use it as a historical indicator, the premium is based on the current loss experience. This means that all claims, especially high -frequency, low security frequency, can immediately affect the company’s financial performance.
Although the former mod can continue to be controlled for external vision and qualification purposes, the care focuses on the manipulation of claims, the continuous manipulation of losses and the proactive security measures that reduce the real paid losses instead of impact only future modifiers.
Final thoughts
In construction, the experience modifier is still a useful lever, especially for companies in the structure of the guaranteed cost program, where it directly affects the eligibility of the premium and the project. For insurance covered in a loss -sensitive program, the ex Mod may have less monetary impact on the premium, although it is still a significant measure of previous security performance. For both of them, claim control control, safe job and aggressive loss control are key strategies for ensuring the accessibility and competitiveness of market insurance.
