by Kory Wells with Jeff Adcock
The fact that California Insurance Commissioner Poizner has once again rejected an increase in workers compensation pure premium rates (read the November 10th Insurance Journal article California’s Poizner Rejects Workers’ Comp Increase Request, Again) is almost overshadowing the fact that he approved other changes that will interest workers compensation agents and others advising clients in the work comp arena.
As stated in the WCIRB’s November 9th announcement:
The Insurance Commissioner approved amendments to the USRP include changes to the Standard Classification System and the elimination of the requirement of insurers to report social security numbers due to privacy concerns. The approved amendments to the ERP include (a) changes to the eligibility threshold, (b) classification expected loss rates, (c) the split formula used to segregate individual claims into their primary and excess components and (d) the ERP credibility (“B” and “W”) values.
This announcement undoubtedly prompts questions such as:
How will these changes to the California rating plan affect the mod?
Part B of the 2010 Regulatory Filings posted on the WCIRB site goes into the changes and their anticipated impact in great detail. A brief summary (emphasis ours) lies in this sentence from page B:C-12:
While this methodological enhancement will improve the accuracy of experience modifications, the 2010 experience modifications for some employers will be impacted.
For those of you who are interested in learning more about the anticipated impact on the expected loss rates and the mod, we’ve packaged an excerpt of Part B in pdf form.
The first page (B:C-12) of the excerpt has a chart showing the impact on expected loss rates (not the mod itself) by industry sector that may be of interest. As you can see, real estate, arts and entertainment, and outside sales are some of the areas where the expected loss rates will change the most, with utilities and construction, education, and administrative also showing fairly significant impacts.
The second page (B:C-36) of the excerpt makes it clear that while the overall statewide average mod is NOT going to change, there will be some variability. The following pages, Exhibits 2.1 through 2.7, show the expected variation in the mod by size of account as measured by expected losses (Exhibits 2.1 through 2.5) and then by existing mod (Exhibits 2.6 and 2.7).
One of our actuaries, Jeff Adcock, consolidated the exhibit data into this spreadsheet (also available in pdf format) so you can have a one-page overview of the estimated impacts. The interesting thing about the existing mod analysis is how current risks with a mod of over 1.00 have a higher percentage of anticipated increase. Jeff is continuing to study the WCIRB documentation and may provide further analysis here on this blog, as warranted.
When will these changes be available in ModMaster?
The change in the split formula requires a ModMaster programming change. We were already working on this change prior to the commissioner’s approval and now have it in testing. This change – along with the new expected loss rates and B and W values – should be available within a couple of weeks.
In the meantime, if you already have 2010 California mods that you could share with us for testing purposes, we’d certainly appreciate you doing so – contact support for more information.
Filed under: Experience Rating (the Mod) | Tagged: California workers compensation, primary excess split, split formula, WCIRB
