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EMPLOYER
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CALCULATING PREMIUM
Here are three criteria which Stonetrust uses to determine
premium:
- Your
payroll
- Type of
business or business
classification
- Your
experience modifier (if you qualify for one)
The first element
considered is the payroll. If you are unsure what payroll to report, see the "Reporting Payroll" section. Payroll amounts determine the compensation an
insurer may have to pay in the event of a claim. The second element
is the business classification assigned to you by NCCI, the National
Council on Compensation Insurance. Your classification will determine the
rate you pay; rates vary according to classifications as some
classifications are riskier than others. The total payroll for each
classification is multiplied by the rate for that classification (rate per
$100 payroll) to determine the estimated premium.
The last element
used to calculate premium is the experience modifier. Your experience
modifier is a reflection of your company's individual loss experience
compared to the experience of all other companies with similar operations. If your modifier is higher than the median, you
will pay more in premiums; if it is lower, you will pay less. For more
information on experience modifiers, see the “Experience Modifiers”
section below.While these three elements are fundamental to determining
premiums, other factors can be used as well. Stonetrust may apply
discounts to policy premiums if acceptable terms are
satisfied.
EXPERIENCE MODIFIERS
What is an Experience Modifier?
An experience modifier is a reflection of your company's individual
loss experience compared to the experience of all other companies in
your state with similar operations. The National Council on Compensation
Insurance (NCCI) compiles payroll and loss information on all
policyholders and establishes criteria for the "average risk"
for each classification code. Your individual modifier reflects a
comparison of your company to the "average risk" in your state.
An experience modifier uses past experience for a class of
business to predict future losses. Based on your company's payroll by
classification and factors developed by NCCI, we are able to determine what
is known as "expected losses". If your company's losses exceed the
"expected losses", your modifier will be greater than the 1.00 median. If
your company's losses are less than the "expected losses", your modifier
will be less than the 1.00 median, resulting in a credit to your
premium.
Who qualifies for an Experience Rating?
Your company must have been in business and carried workers'
compensation insurance for at least 2 full years before consideration is
given. Once you meet the time requirement, you must meet certain premium
eligibility requirements as determined by NCCI. In determining the
eligible premium, it is important to note that the premium used is the
"manual premium", or premium based on your base rates per class code,
exclusive of any credits, discounts or prior debit modifiers. In Louisiana
the eligibility requirements are as follows:
- $10,000 premium for the last year or 2 years in the experience
rating period OR
- An average premium of $5,000 annually if the experience rating
period is more than 2 years
What data is included in an Experience Rating?
The experience modifier is computed using payroll and loss data for 3
consecutive years, excluding the most recent year. Once all of the
applicable data is obtained, it is entered into a complex formula to
obtain the experience modifier.
Losses used are "incurred" losses. This means that both paid and
reserve amounts are shown. Losses used are evaluated on a time scale
established by NCCI, with the first evaluation being 18 months after the
inception of the policy and subsequent evaluations in 12-month increments
thereafter. Data is sent to NCCI annually to update individual
records.
How do losses affect your modifier and your
premium?
The frequency of small claims adversely affects your modifier more than
a single large claim because "primary losses" are
more heavily weighted than "excess losses" in the rating formula. The
single large claim will have a "primary loss" of only $5,000 while the
combined "primary loss" of several small claims may far exceed $5,000.
Remember that each year of experience will be reflected in 3 consecutive
years of experience rating, which means that a single year with numerous
small claims will have an adverse affect on your modifier for 3 years. A
modifier in excess of 1.00 means you will be paying more than the "manual
premium" for your insurance. A modifier less than 1.00 means you will
receive a discount on your manual premium in addition to any other offered
by your insurer.
What can you do to control your modifier?
- The single most effective way to control your modifier is to
implement an active Safety Program designed to eliminate careless
losses. Stonetrust loss control services can assist you with this
program.
- While all claims must be reported to our claims office, you may
choose to pay small medical only claims yourself. If this is the case,
you should file the claim as "for information only" with our claims
office. This is important in the event that the claim turns out to be
more serious than originally thought and develops into a claim for lost
time in addition to the medical portion. You can reach the Stonetrust
claims department at (800) 311-0997.
- Upon policy renewal, you may elect to "buy back" some or all of your
claims for the previous year.
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