Focus on Workers Comp: Key milestones in the Policy Year
Workers comp is among the most lost sensitive policies issued to your insureds. The more they use it, the higher their premiums. With the goal of keeping losses low - and holding onto valued clients - agents need to be aware of the key milestones in the policy year. Today we will briefly outline the flow of the policy year: what happens, when, and what insureds need to know in order to manage their costs.
Most people know when their policy begins: the date when the old policy ends and the new one begins. However, if this is the only focal point for policy-holder awareness, opportunities have been missed to manage the cost of insurance. In thinking strategically about the policy year, the new policy - and new experience mod - are the culmination of a year-long process: not so much the beginning, but the end. There is much that should be done prior to policy inception.
Three Months In
The single most important milestone is three months into the new policy. This milestone is the last opportunity to review open claims from the prior policies that go into the calculation for the next year's experience mod. Agents should secure loss runs at the three month mark and schedule a claims review to discuss strategies on any open claims from the rating period: for example, three months after PY13 begins, any and all losses in policy years 2010, 2011 and 2012 should be reviewed. NOTE: losses in PY 09 will not impact the upcoming PY14 mod, nor will losses in PY13, the current policy.
Six Months In
Six months into the new policy, the carrier submits a unit statistical report which includes loss data for calculation of the next year's experience mod. Six months into PY13, the unit stat report is submitted with losses from PY10-12. Once this report is submitted, it's really too late to impact the numbers that go into the next experience mod. [NOTE: Among New England states, only Massachusetts and Rhode Island have an 'aggravated inequity rule,' which allows for a re-calculation of the experience mod under two specific conditions: the claim closes after the unit stat submission and before the start of the next policy year; and the final value of the claim is at least 25 percent less than the incurred amount.]
Nine Months In
For insureds with more than one or two open claims, a quarterly claims review may be necessary. There should be a proactive strategy for every open claim. The goal, of course, is to close claims as soon as feasible. In addition, with the new policy year just three months away, this would be a good time to project the estimated experience mod for the upcoming year.
New Policy Inception
By following the key milestones throughout the policy year, there should be no surprises when the new policy begins: the insured knows what the new experience mod will be and has an ongoing strategy to resolve any open claims. If the experience mod is high, the insured will know which year the losses occurred and exactly how long they will impact the cost of insurance. Because losses stay with the insured for three years, it's important to understand the long view: at any given moment, losses during the rating period and the experience mod might be high, but with an active claims strategy, an understanding of the insurance cycle and a little patience, a credit mod is usually no more than a year or three away.