Accident Limitations for Retrospective Rating

As Frank Harwayne aptly stated, there have been forces at work in compensation insurance which forced a review of the dollar distribution of losses by size of claim's used to calculate excess loss premium factors for the retrospective rating plan. It should be understandable that inflation alone would not cause the tables developed by Mr. Dunbar Uhthoff to become inaccurate. Mr. Uhthoff carefully shielded his work from this effect by combining state data only after converting them to ratios about the state mean, thereby eliminating dollar amounts. As long as inflation does not cause a change in the shape of the curve describing the distribution by size around the average claim amount, the Uhthoff tables are usable. Even when inflation affects some elements of claim cost (such as medical costs) differently than others (such as wages), basically the overall impact of such a situation is not significant unless the differences in inflation rates affecting the components are both large and of a long-term nature. A simple example of this is the fact that generally changes in hospital and medical fee schedules do not generally cause changes in ELPF’s.