San Francisco, CA December 7, 2010 – On November 9, 2009, the Insurance Commissioner issued a decision approving several changes to the experience rating formula including updated credibility values (“B” and “W” values) and a revised mechanism for segregating claims into their primary and excess components. These changes were proposed by the WCIRB at the recommendation of the Experience Rating Task Force and are intended to simplify the experience rating system and improve its predictive accuracy.
The WCIRB conducted an analysis of the approximately 115,000 2010 experience modifications that were issued through the end of September to determine the impact of these changes. The results of this analysis are consistent with the WCIRB’s projections contained in the January 1, 2010 Pure Premium Rate Filing as well as the analysis performed in April 2010 on a population of approximately 57,000 2010 experience modifications.
The analysis shows that approximately 65% of experience rated policyholders received a lower experience modification than would otherwise have been the case as a result of these formula changes. Approximately 29% of policyholders received a higher experience modification and approximately 6% of the policyholders were unaffected by the 2010 formula changes. Roughly 5% of experience rated policyholders saw increases of between 11 and 20 points in their experience modifications, and approximately 2% saw increases of more than 20 points. The small percentage of policyholders who experienced large increases were employers with worse than average underlying loss experience.
The average statewide experience modification for 2010 of 94% has not been affected by the 2010 changes to the formula. In other words, the total statewide pure premium generated after application of 2010 experience modifications has not been affected by the 2010 formula changes.
For More Information
• For information about the approved changes, see the Spotlight story Approved Experience Rating Plan Changes for 2010 and 2011.
• For general experience rating information, see the Guide to Workers’ Compensation Insurance.
• For information about reading an experience rating worksheet, see California’s Experience Rating System.
• To view the WCIRB’s filing and the Insurance Commissioner’s decision, see the Regulatory Filings Overview section.
Source: WCIRB California