Parametrizing the Workers' Compensation Experience Rating Plan by William R. Gillam [Discussion]

Mr. Gillam’s paper provides an excellent explanation of the detailed actuarial study that led the National Council on Compensation Insurance (NCCI) to revise the Experience Rating Plan for Workers' Compensation. This actuarial study is an example of a practical application of credibility theory to the situation where parameter uncertainty and risk heterogeneity are important. As shown in Exhibit 1, the revised plan shares many of the features of the prior plan. Administratively, the plans are the same. There have been important actuarial changes. As Mr. Gillam states, the revised plan is a single split plan rather than a multi-split plan, and the credibilities that are determined by the parameters of the two plans are very different.