Boca Raton, FL – NCCI recently released a new Insights report examining the relationship between payroll and workers compensation losses, a question that continues to evolve as wage levels, job roles, and workplace dynamics change.
The paper examines how claim frequency and severity vary across wage tiers and what those patterns mean for how payroll aligns with expected losses. NCCI noted that the headline is consistent with its previous research, as payroll continues to function effectively as an exposure base because of its practicality, transparency, and consistent application across a wide range of employers.
At the same time, the report’s findings show that payroll’s relationship to aggregate loss experience is not consistently uniform across all wage levels and presents objective patterns in how loss dynamics change across wage tiers.
Key Insights
- Although alternatives exist, unlimited payroll remains a practical, reliable, and broadly applicable workers compensation exposure base
- Indemnity severity generally rises with wages but plateaus at higher wage levels, while medical severity increases more consistently across all levels
- Claim frequency typically declines as individual wages increase, contributing to variability in the proportionality between benefits and wages
NCCI noted that payroll has consistently been considered a reliable foundation for ratemaking, and the research highlights how that foundation performs under different conditions, particularly at higher wage levels, where factors such as statutory benefit limits and changing claim dynamics come into play. The findings build on that long-standing understanding, offering additional clarity rather than redefining it.
NCCI also highlighted its ongoing commitment to supporting a healthy workers compensation system and that as part of such, it regularly re-evaluates the methodologies that underpin pricing and risk assessment. This latest analysis reflected NCCI’s continued effort, and reinforced confidence in the current approach, while providing insights that may help inform future decisions.
Payroll remains the standard exposure base; however, understanding how well it reflects underlying risk requires ongoing evaluation.
Read the complete report: NCCI: The Relationship Between Benefits and Wages
Source: NCCI