E-Mods |
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In the example below, a discrepancy related to whether two companies' workers' compensation experience is combinable could cost the company $672,100 in workers' compensation premium - per year! |
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January 1, 2008 |
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You are a newly formed roofing contractor in the state of Florida with $8,000,000 in payroll. |
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Your premium should be calculated as follows: |
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Class Code |
|
Description |
Payroll |
Rate |
Manual Premium |
8742 |
|
SALESPERSONS OR COLLECTORS—OUTSIDE |
2,000,000 |
0.64 |
12,800 |
5510 |
|
ROOFING—ALL KINDS & DRIVERS |
6,000,000 |
22.19 |
1,331,400 |
|
|
Total |
8,000,000 |
|
1,344,200 |
|
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Experience Modification Factor (E-mod) |
1.00 |
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Standard Premium |
1,344,200 |
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You work out a payment plan with your insurance company to pay $1,344,200 workers' compensation premium during the year. |
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July 1, 2009 |
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Upon performing an audit of your company, your insurance company observes that you purchased some equipment from a competitor who has retired their business. |
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They decide that the competitor's loss experience should be used to calculate the E-mod for your workers' compensation policy. As a result, they calculate your e-mod to be 1.50. |
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Class Code |
|
Description |
Payroll |
Rate |
Manual Premium |
8742 |
|
SALESPERSONS OR COLLECTORS—OUTSIDE |
2,000,000 |
0.64 |
12,800 |
5510 |
|
ROOFING—ALL KINDS & DRIVERS |
6,000,000 |
22.19 |
1,331,400 |
|
|
Total |
8,000,000 |
|
1,344,200 |
|
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Experience Modification Factor (E-mod) |
1.50 |
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Standard Premium |
2,016,300 |
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Premium Difference |
672,100 |
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August 1, 2009 |
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Your insurance company sends you a bill for the premium difference - $672,100. |
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This bill is on top of all bills related to 2009 workers' compensation premium. |
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Notes: |
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The example above was simplified to demonstrarte the effect of experience rating errors, and does not include the effects of misclassification, premium discounts, or any other rating program generating premium credits or debits. |
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