The hidden secrets about rate reductions are – for every rate decrease the expected loss ratio is lowered. What does this mean? Expected losses are based on actuarial models of how a specific industry is performing (benchmark of the number of injuries and cost of claims in that industry) – if the expected loss factor is lower and the actual losses remain the same the experience mod will increase. For example, the expected loss could be $4500 before the rate cut and $3500 after the rate cut – the actual incurred claims cost remains the same causing the experience mod to increase. So, on the surface the employer may think they are getting a 15 percent rate reduction when in fact they are getting a 30 to 40 percent rate increase.

In addition, these employers may be subjected to consent to rate pricing – this is an add-on premium factor that is charged to companies who fail to control injuries. Another way for insurance carriers to collect the pre-rate reduction premiums.