Severe Claim Experience Mod: Why NCCI's Factor Work Matters
NCCI's June IRRWG agenda points at the quiet problem behind one catastrophic construction claim: the formula softens severity, but renewals still feel it.
A severe claim experience mod is softened by NCCI's split rating rules, not erased. In NCCI's example, a $100,000 loss carries $18,500 as primary and $81,500 as excess, while a $500,000 loss is capped at $200,000 (NCCI ABCs, 2025). That one open reserve can still affect three rating years.
NCCI did not put excess loss factors on its June 17 agenda for academic neatness. It put them there because severe claims are not behaving like tidy averages.
For safety directors and construction CFOs, the severe claim experience mod question is blunt: why does one catastrophic claim not hit dollar for dollar, yet still dominate renewal strategy? The National Council on Compensation Insurance (NCCI) Individual Risk Rating Working Group (IRRWG) met on June 17, 2026, and NCCI's public IRRWG page notes updates to the June 17 agenda (NCCI IRRWG, June 2026). Those topics, excess loss factors, individual claim development, and severity model normalization, all point to that same tension.
NCCI says the quiet part plainly: "The important fact is that the accident did occur" (NCCI ABCs, 2025). The formula cares more about frequency than severity. It still cares about severity.
Why a severe claim experience mod is softened
NCCI's split-rating approach separates a claim into primary and excess loss. In NCCI's current public example, a $100,000 loss with an $18,500 split point produces $18,500 of primary loss and $81,500 of excess loss (NCCI ABCs, 2025). A $500,000 loss is capped at a $200,000 state accident limitation, leaving $18,500 primary and $181,500 excess for experience rating (NCCI ABCs, 2025).
That is the shock absorber. The mod does not swallow the whole $500,000.
But the shock absorber is not a delete key. Move the unresolved reserve from $100,000 to the $200,000 ratable cap and the primary layer stays at $18,500, while the excess layer moves from $81,500 to $181,500 (NCCI ABCs, 2025). That is a $100,000 ratable excess swing. It is softened, not gone.
Excess loss factors (ELFs) sit in a neighboring actuarial room. NCCI says its Excess Loss Factor Calculations product contains aggregate industry data, assumptions, and methodology underlying ELFs, with results by loss limit and hazard group (NCCI Excess Loss Factors, 2026). Contractors do not see that table on the mod worksheet. They do see the same question in miniature: how much confidence should the system put in one very large claim?
Construction severity makes the question current
The timing matters because construction severity is not sitting still. NCCI's 2026 State of the Line Guide says construction has the highest lost-time medical claim severity across all industries, and construction medical severity increased 13% from accident year 2023 to accident year 2024 (NCCI SOL Guide, May 2026). Over half of the top 10 construction classes posted double-digit medical severity increases, while three classes decreased (NCCI SOL Guide, May 2026).
The broader 2025 signal is not much softer. NCCI estimates lost-time claim frequency declined 2% in 2025, while medical claim severity rose 4% and indemnity claim severity rose 4% (NCCI SOL Guide, May 2026).
That is why one open six-figure claim gets attention even when the excess layer receives partial weight. In a rising severity world, it can look like the first report was merely early.
NCCI's large-claim work explains the nervousness. Fast-emerging large claims reach $1 million of incurred loss within roughly 24 months, and NCCI studies thresholds of $500,000, $1 million, and $2 million (NCCI Fast and Slow Emerging Large Claims, January 2026). At the $1 million threshold, fast-emerging claims moved from about 25% of large claims in 2003 to almost 60% in 2023 (NCCI, January 2026). Construction is not a bystander: 25% to 31% of fast-emerging large claims are construction-related (NCCI Large Claims Deconstructed, 2023).
One reserve can ride three renewals
A reserve is an estimate. A mod is a multiplier. The timing turns one estimate into a three-year commercial problem.
NCCI says an employer's experience period is generally three years of payroll and loss data, though it can range from less than 12 months to 45 months depending on policy timing (NCCI ABCs, 2025). For a January 1, 2026 rating effective date, NCCI's example includes policies effective from January 1, 2022 through January 1, 2025 (NCCI ABCs, 2025). Carriers are not required to report the policy data until 18 months after policy inception, which gives time to value losses and submit the unit report (NCCI ABCs, 2025).
Now put a severe construction claim in the 2024 policy year. It can enter the January 1, 2026 mod, stay for January 1, 2027, and stay again for January 1, 2028 before that policy year drops out. Three renewals. One reserve.
What an audit would check
An audit checks whether the severe claim value on the worksheet matches current carrier records, whether the reported injury type and claim status fit the actual file, whether the state accident limitation and split point are being applied under approved rating values, and whether recoveries or reserve changes reached NCCI before the next valuation. It also reads the claim against the three-year window, because a reserve that is directionally wrong in year one can echo into year two and year three. In our reviews of Southeast construction worksheets, severe open claims rarely need guesswork. They need the right value in the right rating year.
A severe claim does not have to be charged dollar for dollar to cost real money. Send us your NCCI worksheet and we'll review it for free.