| Compensable-Claim-Free Firm Experience Factor Calculation Example |  | |
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This example considers the small firm whose Expected Losses were calculated in the Expected Loss Example, and whose Actual Losses were calculated in the Compensable-Claim-Free Actual Loss Example. This example calculates the firm's 2007 experience factor.
This firm has no compensable claims in its Experience Period, so it is eligible for the Compensable-Claim-Free Experience Factor. The Compensable-Claim-Free Experience Factor for a firm of this size is 0.9000.
The firm's Computed Experience Factor is 0.9510 (calculated below). Since the lower of the two factors, 0.9000, 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 0.9000.
| Computed Experience Factor | 962.33 divided by 1,011.87 |
equals | 0.9510 |
| Compensable-Claim-Free Experience Factor | 0.9000 | ||
| Prior Experience Factor | 0.9000 | ||
| Final Experience Factor | 0.9000 |
The calculation of the firm's Computed Experience Factor
Shown in column (b) are the Actual Primary and Excess Losses and shown in column (c) are the Expected Primary and Excess Losses.
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).
| Computed Experience Factor | ||||
|---|---|---|---|---|
| (a) | (b) | (c) | (d) | (e) |
| Actual Losses | Expected Losses | Credibility Weight | Credible Estimate | |
| Primary | 384.00 | 495.82 | 12% | 384.00 × 12% + 495.82 × (100% − 12%) = 482.40 |
| Excess | 0.00 | 516.05 | 7% | 0.00 × 7% + 516.05 × (100% − 7%) = 479.93 |
| Total | 384.00 | 1,011.87 | 962.33 | |
The Computed Experience Factor is the total Credible Estimate from column (e) above divided by the total Expected Losses from column (c) above.
