This paper will describe the new methodology NCCI has developed, and reveal the research approach and analyses underlying the modifications NCCI will be implementing to several key class ratemaking components.
The paper will discuss in detail how the traditional areas of class ratemaking were modified, namely loss development, limiting large claims and applying expected excess provisions, updating credibility standards, and the derivation of industry group differentials.
The paper will also focus on the new NCCI class ratemaking approach from an educational perspective for actuaries who are just becoming familiar with workers compensation. Exhibits are provided in Appendix B illustrating the stepwise derivation of a loss cost for a classification from beginning to end.
Keywords: workers compensation; NCCI ratemaking; NCCI loss cost filings; class ratemaking; loss development by part of body; expected excess by hazard group.
