Client Communications Coordinator, Megan Lockhart and Greg Garcia, Account Executive in the Landscape Group, discuss understanding the primary threshold and its impact on the experience mod.
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Director/Host: Megan Lockhart
Guest: Greg Garcia
Producer/Editor: Megan Lockhart
Music: "Home" by JHS Pedals, “News Room News” by Spence
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Transcript
Alyssa Burley: Hi, this is Alyssa Burley with Rancho Mesa's Media Communications and Client Services Department. Thank you for listening to today's top Rancho Mesa News, brought to you by our Safety and Risk Management Network, StudioOne.
Megan Lockhart: Welcome back, everyone. I'm Megan Lockhart, Communications Coordinator, and I'm filling in for Alyssa this episode. My guest is Greg Garcia, account executive in the Landscape Group with Rancho Mesa. Greg specializes in commercial insurance for the lawn and landscape industry, and today we're going to decipher the primary threshold and its impact on the experience mod. Greg, welcome to the show.
Greg Garcia: Megan, Thanks for having me. Happy to be here in StudioOne and talking a little bit about the primary threshold and the experience mod. So looking forward to it.
ML: Great. So every business owner understands the correlation between their experience mod or ExMOD and what they'll be paying in worker's compensation premiums. So before we get into our discussion on the primary threshold, will you explain that relationship.
GG: Yeah, certainly. I think most business owners have a good understanding on if their experience mod is above one, they'll be what's called a debit mod and at their experience mod is below one, it's a credit mod. So usually any experience mod above one should anticipate having higher worker's compensation premiums than an organization that has an experienced mod below one. So that's kind of the basics of the experience mod. This is why it's so important to hone in on those safety procedures and protocols, because it's important to try to limit any work related injuries as most as much as possible to try to keep those work comp premiums as low as possible.
ML: Okay. So how does the primary threshold fit into the equation?
GG: Yeah. So even the safest company is going to have a worker's compensation claim at some point. It's going to happen. It's not a matter of if, it's when. So that claim happens. Now, what. What the primary threshold is, is it's basically the cap to any single worker's compensation claim that can have on the experienced mod. So that cap is called the primary threshold and the primary threshold varies from company to company, and it's based on company's payroll. So the more payroll your company has, the higher that primary threshold is going to be.
ML: Okay. And can you give us an example of maybe how that works?
GG: Yeah, absolutely. So let's just say for this example, this company has a primary threshold of $15,000 and then a maximum number of points that any one claim can impact the experience mod is 10. So that means that a claim that costs $15,000 and a claim that costs $150,000 will have the same negative impact against the experienced mod. So in this case it'd be 10 points against your experience mod. That's kind of how the how the cap it to make sure that there's you know if you're if you're a really good company and you have one severity claim, one large claim it's not going to blow your experienced mod through the roof. So it's a way for the rating bureau to kind of put a cap on how much one claim can impact your experienced mod. And just so you know, when we're talking about this with our clients, just because a claim exceeds that primary threshold, it doesn't mean you just throw away that claim and you don't think about it anymore. Because what we're always looking at is that current year and five-year loss ratio, which is one of the key factors that an underwriter is looking at when they're trying to determine if they need to credit a certain account and lower premiums in that case. So we're always looking at that current and five-year loss ratio. And the loss ratio is the incurred claimant costs divided by the premium paid out for that organization. So really important to know what the primary threshold is and also understanding that once a claim exceeds that primary threshold, it's not like you just kind of disregard that claim. You still need to make sure you're staying on it and make sure it's getting adjusted properly.
ML: Yeah, okay. That makes sense. Are there any tools that can help business owners understand how the primary threshold affects their ExMOD?
GG: Yeah, for us, what we did for our clients and most of our clients are pretty familiar with that KPI dashboard that we're basically talking with our clients with every claim review where Jim Malone, who's our in-house claims advocate, who's also in on those meetings and we're always going over each open claim and impacts to their experience mod and projecting it out. It's always important to keep track of, you know, where a certain claim sits for example, if we can get a claim closed, if a claim has only been paid out, you know, $5,000 and the primary threshold is $10,000, but this certain claim had a reserve of $25,000 on it. We're going to work as hard as we can to get those reserves taken off of that claim, to try to get some experience mod points back. So kind of confusing, but it's something that we are always talking about with our clients and it makes a lot more sense when you're looking at real life claims. But yeah, so the KPI is a huge tool for us that we use with our clients.
ML: Well, Greg, if listeners have any questions about their primary threshold or would like a customized KPI dashboard, what's the best way to get in touch with you?
GG: Yeah, I can be reached at ggarcia@ranchomesa.com or you can call me at 619-438-6905.
ML: All right. Well, Greg, thanks so much for joining me in StudioOne.
GG: Awesome. Thanks for having me.
AB: This is Alyssa Burley with Rancho Mesa. Thanks for tuning into our latest episode produced by StudioOne. For more information, visit us at ranchomesa.com and subscribe to our weekly newsletter.
