TUESDAY, MARCH 22, 2016
This is relatively simple, yet complicated all at once. Surely enough, we can cover all details in one post. We'll start basic and work into details.
Your insurance company reports claim data to NCCI and roughly 6 months prior to renewal date your experience modifier is "promulgated" aka calculated!
It takes into account claims from 3 years (not the most current policy year as a true picture of claims or indemnity payments hasn't likely developed).
Since, NCCI has all the statistically data from most others within your industry, they can calculate "expected losses" based on industry and amount of payroll you have. This is the ELR on your mod sheet.
Your claims data is compared to industry. It's basically a "should have had" vs "actually had" arrangement to calculate. an experience modifier of 1.00 is essentially a "par" in golf. In fact I would say more like a "par" by making an up and down from off the green. You were real close to a bogey, but didn't make one!
More to follow on next post about NCCI rating!