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Each rating year the Actual Losses are the estimated cost of all of the firm's claims injured or taken ill during the Experience Period with several adjustments.
Most claims in the Experience Period are closed and the costs of these claims are the sum of the payments made on the claim. For claims remaining open, the cost includes both the payments already made on the claim as well as an estimate of payments to be made in the future.
The cost for each claim is then adjusted. All claim costs are capped at the Maximum Claim Value (www.leg.wa.gov) for the rating year. If the claim is a fatality, the Average Death Value (www.leg.wa.gov) is used for the claim cost. If the claim is not a disability claim then an amount twice the average cost of medical only claims are deducted from the cost.
Next, the adjusted costs for each claim are then split into a Primary portion and an Excess portion using the Primary Loss Formula. The Primary portion is the first dollar portion of the claim cost that has been shown to have greater credibility in predicting future experience. The Excess portion is the difference between the adjusted claim cost and the Primary portion of the claim cost and has been shown to have less credibility in predicting future experience. The sum of the Primary portions of the claim costs is the Actual Primary Loss and the sum of the Excess portions is the Actual Excess Loss.
The Primary and Excess costs for Occupational Disease claims, Third Party Injury Claims, or Second Injury Claims may be reduced by a factor to reflect the firm's portion of the claim liability. The following claim costs are not used for experience rating:
- Preferred worker class.
- Workers sustaining an injury or occupational disease as a result of an incident certified to be an act of terrorism under the U.S. Terrorism Risk Insurance Act of 2002.
- "Emergency workers" of nongovernmental employers who assist in a life and rescue phase of a state or local emergency (disaster) as defined in RCW 51.16.130(3) (www.leg.wa.gov).
Examples:
- Compensable-Claim-Free Example of the Actual Losses used for Experience Rating for a firm with no compensable claims.
- Firm with a Compensable Claim Example of the Actual Losses used for Experience Rating for a firm with a compensable claim.
