In addition to recent formula changes for 2012 in the California experience rating plan, the WCIRB has also adopted a significantly new format for its experience rating worksheet. You’ll think I’m a geek (if you didn’t already) for admitting this, but I’m loving the new format. While of course I’m partial to the myriad ways we slice, dice and present mod data in ModMaster reports, I think the new bureau format takes a huge step forward in usability. Here are four reasons why.
1. Documentation. A sample of the new format is shown on this WCIRB web page. As you’ll see, each section is labeled with a nice bright number, and clicking on the number takes you to an explanation of that section. An updated explanation of the experience rating form and process also follows the employer’s worksheet itself, so you’ve got both hard copy and online resources to help you understand, clarify, or discuss any part of the report.
2. Layout. The WCIRB has abandoned the old format, which had all payroll and expected loss information followed by all actual loss information. Under the new format, the left side of the page is payroll and expected loss information, and the right side of the page is actual loss information. The data is further organized by policy period (in descending order), so it’s very easy to go down the page, look at the totals row for each period, and compare expected primary and excess totals on the left with actual primary and excess totals on the right. Before you even get to the footer information, if you keep seeing totals on the left being considerably less than totals on the right, well – you know there’s probably going to be an issue with the mod. Likewise, you can quickly see if worse experience is near the top of the report (and therefore more recent), or near the end of the report (and therefore likely to be aging out of the mod calculation next year).
An aside for those of you who also analyze NCCI mods: It’s notable that the new WCIRB format is somewhat similar to NCCI’s newest worksheet format, but in my opinion the WCIRB is more usable for “eyeballing” policy period trends because each totals line shows expected and actual totals. The left side of the NCCI report shows subject premium totals rather than expected loss totals by policy period.
3. The new footer. Here we get to the core of the reason the WCIRB made a change to the formula: they wanted it to be easier to talk about. The new formula is now well-labeled in two distinct parts: the credible primary loss and the credible excess loss. We no longer have to track a bunch of little superscripted letters from one box to another to follow the formula (although the little letters are still there, for those of you who may have grown fond of them.) It’s very easy to see how:
- In the credible primary (left) section, expected and actual primary losses are being weighed by the credibility primary factor, and
- In the credible excess (right) section, expected and actual excess losses are being weighed by the – you guessed it – credibility excess factor
As a reminder, both the credibility primary and the credibility excess factors increase with total expected losses. However, credibility excess is zero for lower levels of expected losses, and it increases at a slower rate than credibility primary. This means that both primary and excess losses are more significant (or credible) for larger companies than smaller ones, but excess losses in particular are more credible for larger companies (as measured by expected losses and, underlying that, payroll).
4. The loss-free rating. This was actually introduced in 2011, but it bears mentioning again. In the lower left of the footer, a “loss-free rating” number is shown. This is what we’ve been calling the “minimum mod” in ModMaster for many years. It’s the value the mod would be if NO actual losses had occurred in the experience period. The WCIRB documentation says this is a “hypothetical” rating. Perhaps I’m being too picky about semantics, but to me “hypothetical” suggests it’s an assumed but not achievable number. (If I tell my teenage son he can hypothetically make all A’s, is that as powerful as saying I know he can make all A’s?) It’s great to have this number on the report, but remember, companies are able to achieve perfect safety records and their minimum mod!
Kudos to the WCIRB on the implementation and documentation of these changes. For ModMaster users, note that similar terminology and appropriate calculation support is now available in ModMaster version 5.0, where California has become its own calculation type for mods effective 1/1/2012 and later.
What are your thoughts or questions about the new California worksheet format? Do you like it as much as I do, or are there any downsides I’ve overlooked?
– Kory Wells, WorkCompEdge Blog Editor
The post The New – and Improved! – California Experience Rating Form appeared first on Insurance Broker Software.
