Changes Coming to Workers Compensation Insurance

(This is an installment of Risk Management 101, a series of blog posts exploring AssuredPartners NL’ Risk Management offerings. In order to learn more about AssuredPartners NL’ approach to Risk Management, please visit the previous post. ) 


For the past 20 years, workers compensation insurance rates have primarily been determined from one formula. While the formula itself isn’t changing, the National Council on Compensation Insurance (NCCI) has made sweeping changes to the cost limits that will affect all companies in the near future.

The rate you pay for your workers compensation insurance is based off of a modification number, or a ratio of actual losses divided by expected losses (an average of similar companies from within the same state). Typically, the higher your modification number is, the more you will pay for future workers compensation insurance.


Simply put, your modification number is based off of two factors: primary losses (the first $5,000 of each claim) and excess losses (incidents that exceed $5,000 in medical costs). Primary losses count dollar-for-dollar in the modification number, penalizing those that have more losses.  Excess losses are discounted, so as not to penalize those who have one major loss, as opposed to multiple smaller losses.


The $5,000 figure is known as the split point and was established nearly 20 years ago, failing to clearly reflect the costs of claims in today’s world.  This was a huge benefit for companies that had many losses exceeding $5,000, since those dollar amounts were discounted when calculating the modification number.

The NCCI has issued revisions that, once adopted by states on an individual basis, would immediately increase the $5000 split point to $10,000. Over the following three years, the $10,000 split point would then gradually increase to $15,000. This means that more losses would be included at the full dollar-for-dollar amount, increasing the modification number for companies with a high frequency of incidents.


To find out how this change in the split point will affect you and how AssuredPartners NL can help guide you through the changes, check back tomorrow for the second blog of this two part series.

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