Firm with a Compensable-Claim Experience Factor Calculation Example

	Frequently Asked Questions

This example considers the small firm whose Expected Losses were calculated in the Expected Loss Example and whose Actual Losses were calculated in the Firm with a Compensable Claim Actual Loss Calculation. This example calculates the firm's 2007 experience factor.

The Actual Primary and Excess Losses are shown in column (b) and the Expected Primary and Excess Losses are shown in column (c). The 2007 Primary and Excess Credibilities for a firm with these expected losses are shown in column (d), and the calculation of the Credible Primary Actual Loss Estimate and Credible Excess Actual Loss Estimate is shown in column (e).

Experience Factor Calculation Example

Experience Factor Calculation Example
(a)	(b)	(c)	(d)	(e)
	Actual Losses	Expected Losses	Credibility Weight	Credible Estimate
Primary	619.00	495.82	12%	619.00 × 12% + 495.82 × (100% − 12%) = 510.60
Excess	0.00	516.05	7%	0.00 × 7% + 516.05 × (100% − 7%) = 479.93
Total	619.00	1,011.87		990.53

The Computed Experience Factor is the total Credible Estimate from column (e) above divided by the total Expected Losses from column (c) above.

This firm has a compensable claim in its Experience Period, so it is not eligible for the Compensable-Claim-Free Experience Factor. The Compensable-Claim-Free Experience Factor for a firm of this size is 0.9000.

Since the computed factor, 0.9789, is within 25% of the firm's prior experience factor of 0.9000, the limitations in WAC 296-17-865 (www.leg.wa.gov) do not apply, so the Final Experience Factor is 0.9789.

Computed Experience Factor	990.53 divided by 1,011.87	equals	0.9789
Compensable-Claim-Free Experience Factor			N/A
Prior Experience Factor			0.9000
Final Experience Factor			0.9789