If there’s one thing about workers' compensation insurance that confuses business owners, it’s the experience modifier (X-Mod). An X-Mod is a numeric factor that’s used to calculate your workers' compensation premium. It may also be called an E-Mod or experience modification rate (EMR). You’ll find it on the Information Page of your policy in the section that shows your premium. Your X-Mod can significantly increase or decrease your cost of insurance so it’s important to understand what it is and where it comes from.
X-Mods Explained
X-Mods are used in experience rating, which looks at your previous claims history to modify your current premium. An X-Mod is a numeric factor that may be greater than, equal to, or less than 1.0. Examples are .90 and 1.05. Your X-Mod is multiplied by your workers' comp premium so it can raise or lower your cost of insurance.
A rating organization calculates your X-Mod by plugging your premiums and losses into a mathematical formula. The formula compares your loss history to that of other businesses in your industry. If you’ve sustained fewer than average losses, your X-Mod will be less than one, and will lower your premium. The reverse is also true. If your loss history is worse than the industry average, your X-Mod will be greater than one, and raise your premium. An X-Mod that’s less than 1.0 is considered a “good” because it indicates that your loss experience is better than the industry average.
To see how an X-Mod works, suppose your manual premium (premium before the X-Mod is applied) is $8,125 and your X-Mod is .95. The fact that your experience modifier is less than one indicates that your loss experience is better than the average for your industry. Your reward for your good experience is a $406 discount on your workers' comp premium. You pay $7,719 (8,125 times .95) instead of $8,125. Now suppose your X-Mod is 1.05. An X-Mod that’s greater than one indicates your claims experience is worse than the industry average. You are penalized for your poor experience with a $406 debit. Your actual premium will be $8,531 ($8,125 times 1.05).
The Workers’ Comp Rating System
To understand X-Mods, you need to know a bit about workers' comp rating. All states have a system for classifying and rating employers. A majority of states use a classification system developed by a national rating bureau called the National Council on Compensation Insurance (NCCI). The remaining states (including California) use their own classification system. Most state-specific classifications systems are similar to the NCCI’s. If you understand how the National Council’s system works, you’ll have a good idea of how the others work.
The NCCI rating system divides employers into categories (classifications) based on their occupation. Employers with similar types of businesses are assigned the same classifications. For instance, businesses that engage in tree trimming might be assigned the classification Tree Pruning and Removal. Similarly, companies that operate accounting or auditing businesses might be classified as Auditor, Accountant or Computer System Designer. Each classification has an associated four-digit classification code. The NCCI class code for Tree Pruning and Removal is 0601 while the class code for Auditors, Accountants, etc. is 8803.
Each workers' comp class code is assigned a rate that varies from state to state. Workers' comp premiums are calculated for each class code by multiplying a rate times payroll and dividing the result by 100.
Workers’ Comp Premium = Rate x Payroll/100
For example, suppose your workers' comp policy includes the following class codes, payrolls, and rates. Your premium calculation would be:
1. Introducing Yourself
Your introductory email needs to pack a lot of information into a small package. Try something like this:
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Hello Jane,
My name is John Doe and I work for ABC Agency, where we provide business insurance policies to many of Dallas' rockstar small businesses.
Congratulations on your new business, Jane's Bakery. Are you wondering if you have all the insurance you need? Or if your policies will really cover you in a pinch?
At ABC Agency, we pride ourselves on providing robust, comprehensive coverage options to companies like yours with flexible, pay-as-you-go plans.
Are you available this week to talk more about how we can help? I can help you find the most affordable rates and the best policies out there.
I look forward to speaking with you soon.
Cheers,
John Doe
2. Presenting a Quote
Once you've met with your potential client, a quick reply with their quote will get the ball rolling.
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Hi Jane,
Thanks so much for meeting with me this morning. I loved touring Jane's Bakery–I can still smell those delicious chocolate chip cookies baking! You have a great location, and I'm sure you're going to do great on Front St.
After reviewing my notes, I've pulled together an insurance quote for you (attached). I recommend a business owner's policy. A BOP includes several insurance products in one: liability, property insurance, and business interruption insurance. It offers robust coverage at a competitive price.
I'll call you in a few days to see what you think about this insurance plan. In the meantime, if you have any questions, don't hesitate to email me or call me at [phone number].
Again, thank you for your time today. I look forward to working with you in the future.
Cheers,
John Doe
3. Thanks for Purchasing a Policy
Gratitude is important! It's never a bad idea to thank your clients for their business.
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Hi Jane,
Thank you for choosing a business owner's policy with ABC Agency. We know it's so important to get the right coverage for your business, and we are honoured you've placed your trust in us.
We're excited to work closely with you, and our no. 1 goal is to make sure you're business is always protected.
Do you have any questions? We are here to help. Reach out whenever something comes to mind.
Thank you again for choosing ABC Agency to insure Jane's Bakery.
Cheers,
John Doe
4. Welcome Email
A welcome email helps clients feel like you're there to help–and can softly pitch other insurance products you offer.
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Dear Jane,
Welcome to the ABC family! We are thrilled to have you as a new customer and can't wait to meet all of your insurance needs.
As an independent insurance agency, we work with multiple insurance providers to find the best coverage options for all our customers. If you need any other type of insurance–like [include additional offerings unique to your agency, like life insurance, health insurance, home insurance or anything else]–we can help you too.
Do you want to discuss any of these policies?
Cheers,
John Doe
5. Introducing a New Product
A happy client may want to expand their business with you.
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Hello Jane,
I hope all is well with you and Jane's Bakery. I stopped in yesterday for a blueberry muffin and coffee, and they were delicious. I loved the hint of cinnamon in the muffin! Was that your idea?
I wanted you to be the first to know we are now offering commercial vehicle insurance to our policyholders. Auto insurance for your catering vans is super important since your personal car insurance won't cover them.
We're offering this insurance coverage solely to our current business clients at the moment and have some very competitive rates.
Would you like me to work up a quote for you?
As always, thanks so much for being a part of the ABC family.
Cheers,
John Doe
6. Asking For Referrals
Once your relationship is established and comfortable, let your clients help you grow.
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Hi Jane,
You've been a valuable member of the ABC family for two years now, and we so appreciate your business–not to mention the muffins you supply for our monthly meetings!
Because you are a valued policyholder, I wanted to ask a quick favour. I know you are active in the local Chamber of Commerce, and I'm hoping you might know some colleagues who would benefit from working with our insurance company.
Referrals are one of the most effective ways to connect with our community since people really trust their friends, family and colleagues. Is there anyone you'd recommend I speak with?
Remember that in addition to business insurance products, we offer everything from life insurance policies to pet insurance.
As a thank you for your help, we will send you an Amazon gift card of $100 when your referrals buy insurance from us.
Thanks so much for your help!
Cheers,
John Doe
7. Policy Renewal
If your client needs to renew their policy with you, send an email like this:
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Hi Jane,
I hope you're doing well! What a year it's been—from being listed as one of the top 5 bakeries in Dallas to being an official vendor for the city—you have so much to be proud of.
Just a heads up that your business owner's policy is up for renewal soon and will expire on June 15, 2023.
If you're still happy with the coverage, we can easily renew it for you.
Do you have some time to chat this week?
Looking forward to serving you again!
Cheers,
John Doe