Rate Levels for Workmen's Compensation Premiums

The proposal has been made that compensation rate levels shall be keyed to experience indicated by calendar year figures, and it is the purpose of this paper to discuss this. With the proposal I am in entire sympathy although, as will be seen, I do not agree with the suggestions which have been put forward for the specific carrying out of the idea. As far as fixing a rate level is concerned there is no particular virtue in using policy years, for what is needed is an indication of the total level of the rates, and for this purpose either a calendar or a policy year experience can be used, provided that the experience used is indicative. By this I mean that we should pick the most indicative experience available, whether it be calendar or policy year or for that matter on any other basis, and should use this as the basis of determining our rate level. As a matter of fact in considering policy year versus calendar year experience for rate level purposes the latter has several advantages.