B.07.Gillam

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Author:
Exam8
ID:
166020
Filename:
B.07.Gillam
Updated:
2012-08-14 15:23:12
Tags:
experience rating mod gillam SRP ELR ratio
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Description:
Workers Compensation Experience Rating
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  1. Factors reflected in experience rating
    • compensation
    • variation in plants & premises
    • operating processes
    • materials involved
    • management
    • morale of employees
    • claim consciousness
  2. Weight to actual experience
    As VHM incr, we can increase cred of actual
  3. Premium level vs rate level
    • rate lvl: depends on manual rates only
    • premium lvl: also depends on experience rating, schedule rating, ...
  4. Off-balance
    • SP / MP
    • premium weighted average modification
    • if adequate, should be close to 1 (slight credit because only good large risk qualify for experience rating)
  5. Modification factor
    • prospective measure
    • not designed to recoup past losses or rebate savings
    • not necessarily signal of poor performing insd
  6. 2 conditions for correct credibility
    • necessary: cr & debit risk should produce same LR
    • sufficient: risks within a group can not be subdivided on any experience basis to produce diff LR (not requirement)
  7. Gillam quintile test
    • group risks by size, separate into quintiles based on mod
    • for each group calculate unmodified ratio and modified ratio
    • test statistic: var(mod ratio) / var(unmod ratio)
    • low test statistics means plan eliminated most of btwn var
    • efficiency test: same but on all risks (no quintile)
  8. WC loss categories
    • serious: indemnity portion of fatal / PT / major
    • non-serious: indemnity portion of TT / minor
    • medical
  9. Plan parameters by state & size
    • state reference point (SRP)
    • weighting (W)
    • ballast (B)
  10. Rating values by state & classification
    • expected loss rates (ELR)
    • discount ratios (D-ratios)
  11. Modification factor
    • M = [Ap +WAX + (1-W)Ex + B] / (E + B)
    • E = Σ (Payrolli . 100) * ELRi
    • Ep = Σ Di * Ei 
  12. State reference point (SRP)
    • index of benefits in the state
    • SRP = 250 * state avg cost per clm (SACC) round to 5K
    • SACC based on 3yr trended non-limited loss (except 100K limit for employees liability)
    • SRP can not decrease from prior yr, unless significant benefit reduction
    • G = SRP / 250K, round to 0.05
    • B > 0, 0 < W < 1
  13. Expected loss rates (ELR)
    • expected loss per $100 payroll
    • start w manual rate loss cost
    • multiply by PLR to remove tx, expense, profit
    • adjust for time frames differences
    • adjust to reflect that policy does not limit clm size
  14. ELR by hazard group / class
    • determine avg cost per case for 3 serious injury types
    • calculated XS ratio
    • weight XS based on injury weights
    • hazard group adjustment factor = 1 - XS ratio
    • HGAF * ELR factor & apply to each class' rate
    • check for reasonableness
  15. D-ratio
    • calculated from most recent 3yrs (1/1/90 uses 87)
    • calculated by injury types
    • weight by injury
  16. Experience rating stability
    • capping: limited so SAL = 10% * SRP
    • swing limits: limit to rate of chg btwn periods
    • avg impact of stabilizers spread to all classes to achieve selected rate change

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