Class Ratemaking for Workers Compensation: New Developments in Loss Development

By Thomas V. Daley

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Abstract

For loss cost filings beginning in October 2009, NCCI implemented the largest set of changes in 40 years to the methodology used to determine class pure premiums in workers compensation.

This paper describes the new loss development methodology NCCI has implemented, the applied research approach, and some analyses of actual results achieved after making the modifications. It illustrates how specific areas of class ratemaking were modified, namely, loss development, limiting large claims, and applying expected excess provisions.

KEYWORDS: Workers compensation, NCCI ratemaking, NCCI loss cost filings, class ratemaking, loss development by part of body, expected excess by hazard group

Citation

Daley, Thomas V., "Class Ratemaking for Workers Compensation: New Developments in Loss Development," Variance 6:2, 2012, pp. 196-244.

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Mission Statement

Variance (ISSN 1940-6452) is a peer-reviewed journal published by the Casualty Actuarial Society to disseminate work of interest to casualty actuaries worldwide. The focus of Variance is original practical and theoretical research in casualty actuarial science. Significant survey or similar articles are also considered for publication. Membership in the Casualty Actuarial Society is not a prerequisite for submitting papers to the journal and submissions by non-CAS members is encouraged.