Writing WC Midterm or at Renewal?

Indiana_Adam

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Up until now, I was ignorant to the difference between the ARD and RED and how they impact premium. I assumed they were one in the same and for the most part, disregarded them.

However, now that I'm informed, I have a few questions.

Do you hold off on writing a workers comp policy until the renewal date so both ARD and RED stay in line with the policy effective dates?

Or, Do you advise the client the first year will have some fluctuations due to these dates and it will impact premium, but there is no way to calculate what those changes will look like?

Granted, I don't want to miss out on new business, but I also want what is best for my clients, even if it means passing on writing a policy for a period of time.
 
If you analyze the history you can determine if the outcome will be detrimental or advantageous to the insured to switch mid term. I may have this backwards because I had only done it once and it was nearly 6 years ago but if their Mod is increasing on the next anniversary date I think the effect is similar to deferring that increased Mod and shortening the overall period of time that it is applied to the rating, whereas if their Mod is decreasing it has the same but opposite effect in that it decreases the period of time the lower Mod is applied to the rating so they are stuck with the higher Mod factor for a couple months instead of immediately enjoying the new, lower Mod.

You really need to understand the Mod worksheet and have a good handle on their loss history, especially if there are open reserves that could go either way. So, usually best to keep everything concurrent...

If you are interested, these guys really know their stuff. I'm working with one right now and am really impressed with their approach -

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Changing the Date will require the x-mod to be adjusted.

This can go either way for the client depending on which way their mod goes. Most of the time agents will not mess with it unless something was filed incorrectly or they have been rated/classified incorrectly otherwise the difference in premium typically isnt worth the work for both client and broker.
 
Eugene, are you saying the agent would have to manually have the rating effective date changed or it would be messy indefinitely?

I was told by an NCCI rep. the rating effective date should change to match the new policy renewal dates by the 1st or 2nd renewal(same with the ARD). So first and second year are a bit bumpy(depending on how the insuring company handles the mid-term changes), but then should self-correct. Then again, I bet I could call them again tomorrow and get a different answer from someone else.

Xdate, is there anyway to calculate what the mod is going up to, based off premium and amount of a closed loss?
 
It does not come up frequently so please correct me if I am wrong. I would think this to be a niche and personally would consult a WC specialist.

From what I have seen most people elect to have it on the same date just to make it easy. The NCCI rep is right, it naturally adjusts back to normal after a renewal or two. You need to look at your motivation for doing it.

If you are just wanting the business most people will wait and run it on the same dates like Cottonland said. Otherwise you run the risk of negatively impacting their rating and or creating a lot of work for yourself and the client just to get paid.

IMO if you can get the GL and other lines Comp shouldnt be too hard get as well.

I have seen cases when changing the following period the rating is based off of makes sense.

The idea would be to have the following period consist of a more favorable rating, potentially excluding or including better variables the X-mod is determined from. It takes some research to determine if the outcome will actually put the client in a better spot.
 
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Eugene, are you saying the agent would have to manually have the rating effective date changed or it would be messy indefinitely? I was told by an NCCI rep. the rating effective date should change to match the new policy renewal dates by the 1st or 2nd renewal(same with the ARD). So first and second year are a bit bumpy(depending on how the insuring company handles the mid-term changes), but then should self-correct. Then again, I bet I could call them again tomorrow and get a different answer from someone else. Xdate, is there anyway to calculate what the mod is going up to, based off premium and amount of a closed loss?

Sorry for the delay. At my level of expertise, at least what it was, it was more like eyeing up a 2x4 to wedge into a door frame than an actual calculation. If the premium size and amount of closed losses are obvious, you can at least guesstimate which way it will go. To actually calculate where the Mod will land takes some real expertise in understanding the rating worksheet, time lines of reserve payments and closing of claims and a very good grasp on claims management.

In my few experiences there were a couple factors that worked in our favor, primarily there were excessive reserves. We worked to get some reduced and expedited the process of getting others closed. Some of the reserves were all ready factored into the exp rating and others had yet to hit. It is muddy water, so if it's not as sure a bet as you're comfortable with I'd say leave it alone. Keep in mind you need a decent premium size to even have a shot at a good credit mod or general % decrease. If the insured is paying anything less than $50-100k (I think) I don't think you can get the mod much lower than a .95, assuming they're at a 1.00.

Others can probably give better advice but that is the best I can do, so hope it helps.

Ps-
Keep in mind I have no affiliation with that link I previously posted, but I do know those guys love taking on complex risks such as this. I'm sure their training/certification isn't cheap but if you work a lot of accounts like this it might be worth looking into.

www.InsuranceXdate.com - prospecting & lead management for commercial agents
 
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