This bulletin highlights the changes NCCI is implementing to their Experience Rating Plan as outlined in Circular CIF-2011-14, Item E-1402 (see the file attachment below). 

 

These changes will become effective concurrently with each state’s approved rate/loss cost filing effective on or after January 1, 2013 (see list of states and effective dates below).  In addition, independent bureau states of Michigan, North Carolina and Wisconsin have also approved the NCCI changes. 

 

1/1/2013	3/1/2013	4/1/2013	7/1/2013	10/1/2013
Connecticut Florida Illinois Indiana Maine Michigan New Hampshire Oklahoma	Alabama Georgia Mississippi Tennessee	North Carolina Vermont Virginia	Arkansas South Carolina	Kentucky Wisconsin

 

NCCI updates include two significant changes:

1.    Increases to the primary/excess split point to an inflation-adjusted $15,000 over a three-year transition period and continue to increase this amount thereafter on an annual basis using a countrywide inflation index.

 

a.    In year one,  increase the primary/excess split point to $10,000, to become effective concurrently with each state’s approved rate/loss cost filing on or after January 1, 2013

b.    In year two, increase the primary/excess split point to $13,500, concurrently with each state’s approved rate/loss cost filing.

c.     In year three, and annually thereafter, concurrent with each state’s approved rate/loss cost filing, increase the primary/excess split point to the indexed value for $15,000. The index would estimate annual countrywide severity changes between the average loss date for experience rating modifications in the initial year of implementation and the effective year.

 

Example:

Split Point		Current $5,000	Year 1 $10,000	Year 2 $13,500	Year 3 $15,000
$4,000 Claim	Primary	$4,000	$4,000	$4,000	$4,000
	Excess	$0	$0	$0	$0
$12,000 Claim	Primary	$5,000	$10,000	$12,000	$12,000
	Excess	$7,000	$2,000	$0	$0
$50,000 Claim	Primary	$5,000	$10,000	$13,500	$15,000
	Excess	$45,000	$40,000	$36,500	$35,000

 

 

2.    Revision to the maximum debit modification formula.   Experience rating modification factors determined by the formula in Rule 2-D-1 are subject to a cap if the debit modification exceeds a specified amount.   The cap varies by state and by the size of an employer.  

a.    The new formula has a hard minimum of 1.10 rather than 1.00. A maximum debit that approaches 10% is more reasonable than a 0% debit.

b.    The new formula will account for differences across states in claim severities. Under the new formula, two identical employers in two different states would be subject to the same experience rating modification cap.

 

For additional information and a free webinar regarding this topic, we encourage you to review the NCCI’s website at:   www.ncci.com/NCCIMain/Education/ExperienceRating.          

 

This is also a perfect opportunity for customers to review their safety programs.  Please contact your Underwriter or Field Manager with any specific needs or questions.

NCCI Exp Mod Circular.pdf (548.69 kb)