Upcoming Changes - Workers Compensation classification
Download
Report
Transcript Upcoming Changes - Workers Compensation classification
Upcoming Changes
To NCCI Experience
Modifiers
Edward J. Priz, CPCU, APA
Effective 1/1/2013
A New formula will be used
in states that use NCCI to
calculate experience
modification factors
Non-NCCI States not
affected
California, Michigan, New York, New
Jersey, Pennsylvania, Delaware, and
Monopoly Fund states will continue using
own formulas.
But only CA, MI, PA, and DE will be
standalone for interstate risks.
This will affect all
employers who are
experience rated
Some will get lower
modifiers, some will get
higher modifiers
What’s Changing?
Primary and Excess Losses
Experience Mod Directly
Impacts Premium Charges
Multiplier applied to Manual Premium
1.25 Mod means a 25% Surcharge
.75 Mod means a 25% Credit
Debit Mod Illustration
Class Payroll
Rate
Premium
8810 $100,000 $0.35
$350.00
8742 $ 50,000 $0.65
$325.00
3632 $500,000 $7.50 $37,500.00
Total Manual Prem:
$38,175.00
Modifier:
1.25
Modified Premium:
$47,419.00
Credit Mod Illustation
Class Payroll
Rate
Premium
8810 $100,000 $0.35
$350.00
8742 $ 50,000 $0.65
$325.00
3632 $500,000 $7.50 $37,500.00
Total Manual Prem:
$38,175.00
Modifier:
.75
Modified Premium:
$28,631.00
Primary Losses
Old Formula: First $5,000.00
New Formula: First 10,000.00
Ultimately, First $15,000.00
The New Formula
Will count more of certain claims, in both
actual losses and expected losses.
Impact will vary
Generally, employers with low losses will
see lower modifiers than under old
formula
Employers with higher losses will see
higher modifiers than under old formula
One hypothetical employer
No actual losses
$50,000 in expected losses
Old Mod: .83
New Mod: .77
Same Employer, more
claims
With 3 claims of $25,000 each:
Old Mod: 1.09
New Mod: 1.20
Low Severity v. High
Severity
New formula will widen gap between
mods of these kinds of employers
Same employer, low
severity class, No claims
Old Mod: .80
New Mod: .74
High Severity, No Claims
Old Mod: .87
New Mod .83
Size of Employer
New formula will widen gap between
mods of small employers and large
employers, other factors being equal
Medium Employer, no
claims
Old Mod: .83
New Mod: .77
Large Employer, No Claims
Old Mod: .60
New Mod: .54
In Summary
New Formula kicks in January 1, 2013
Will Increase threshold for Primary Losses
in annual steps, up to $15,000
After that, increases for inflation
Also alters formula for maximum mod
Impact of New Formula will vary based on
loss history of particular employer
Only in NCCI states