ABSTRACT
By law every employer is required to provide workers’ compensation coverage. With the exception of a few states such as Ohio, Washington, North Dakota, etc., that have the state program, and the self-insured companies, this coverage is primarily provided through private insurance carriers. Like the insurance for personal auto, the premium for workers’ compensation is based upon the experience of the individual employer relative to similar businesses within the state. This experience is indicated by an experience modification rating factor assigned to the employer by a rating agency such as the National Council on Compensation Insurance, Inc., or NCCI. At the time of this writing 40 states participate in the ‘experience rating’ from NCCI. The rating is used ‘as is’, or a state version of it with some variation, to determine the modification rating factor and to more accurately predict future workers’ compensation losses. A rating of 1. 00 indicates average loss experience, anything below 1.00 shows relatively fewer losses, and vice versa. Insurance companies use the experience modification rating (MOD) to modify the workers’ compensation coverage premium. A sample NCCI rating worksheet is shown in Figure 1. To see the explanation of experience rating worksheet components, one can check the NCCI website at ‘www.ncci.com’.
