To move forward with CIV Inc.'s forensic review, we will need: Signed and dated agreement and letter of authorization. We will email a general list of needed documents. 1. Experience Modification Worksheets (Xmods/mods) A. The original and all revisions for each policy year we will be reviewing. 2. Policies, endorsements, final audits (include any and all revisions per year). 3. Currently valued loss runs. Depending on the account we will review 7 to 12 years worth of policies. If you do not have all the needed data, we will help assist you obtain the data via your current and/or historical agents and insurance companies.
Breaking down each year's data used We now know three out of the last four years of data is used to calculate your current experience rating. We now know which years impact your experience rating 01/01/2021 Rating period skips the 01/01/2020 data and uses the 01/01/2019, 01/01/2018, and 01/01/2017 data. For this example, each year's data will be the same so to keep this simple. Your expected losses are calculated using your class codes payrolls times an expected loss rate per $100 of payroll. (Each class code has its own expected loss rate.) For this example, we will only use one class code and a fictional expected loss rate. Class Code 5510 payroll $500,000 x's $5.00 ELR (expected loss rate) equals $2,500,000 divided by $100 equals $25,000 of expected losses for the policy period. For this example, all three years 01/01/2019, 01/01/2018 and 01/01/2017 have the same payroll. $25,000 x's the three years gives you $75,000 in expected losses for the 01/01/2021 policy period. The actual mod calculation is much more complicated, there are other factors used to calculate your final experience mod. This is meant to understand the THEORY, a rough understanding of how the mod is created.
Now that we know three out of the last four years of your data is used to calculate your experience rating, what exactly is the data used? To keep it simple (and not to get too deep into the weeds) the data calculated compares your expected losses (losses that you are expected to lose) vs the losses you actually acquired. In THEORY, if your 01/01/2021 experience rating (using 3 out of the last four years worth of data) calculates you are expected to lose $75,000 01/01/2020 data is not used 01/01/2019 data calculates you are to lose $25,000 01/01/2018 data calculates you are to lose $25,000 01/01/2017 data calculates you are to lose $25,000 For a total of $75,000, you are expected to lose on your 001/01/2021 policy period. IN THEORY!!! In THEORY, if you are expected to have $75,000 worth of claims for the 01/01/2021 policy period and you actually do acquire $75,000 worth of claims, you would be average, in theory, you would be issued a 1.0 experience rating factor. In THEORY, if you have fewer losses than what you are expected to have, your future experience rating should go down. If you have more, your future rating will go up. Now keep in mind, this is in theory. If you actually have losses that match exactly what you are expected to lose, your experience rating will be issued as a debit!