Why Washington Offers a Claim-Free Discount

The Claim‑Free Discount has been a part of Experience Rating in Washington since the mid‑1970s. This discount is available to firms without compensable claims in their Experience Period and it is designed to reflect the greater credibility and lower future claim costs of these firms.

Greater credibility

Actuarial studies of Washington firms have consistently shown that compensable‑claim‑free firms have greater credibility than other firms of the same size. This means that the good claim experience of compensable‑claim‑free firms has better predictive value when forecasting their future claim costs. The Claim‑Free Discount is a special experience rating procedure that uses appropriate larger credibilities for compensable‑claim‑free firms.

Lower future claim costs

The same studies have shown that, on average, compensable‑claim‑free firms have lower future claim costs than other firms of the same size. The Claim‑Free Discount is designed to reduce the premiums for the compensable‑claim‑free firms to reflect their lower future claim costs.

By reducing the premiums in line with the expected costs, the Claim‑Free Discount treats the 2 types of firms, compensable‑claim‑free and those with compensable claims, fairly.

In Fiscal Year 2011 Claim‑Free firms reduced their premiums below their base premiums by approximately:

  • $75.6 million overall, consisting of a
  • $60.9 million reduction in the firms' portion, and a
  • $14.7 million reduction in the employees' portion.

Compensable claims

Compensable claims are claims with disability benefits (timeloss, partial permanent disability, total permanent disability, or death) either paid or estimated to be paid. Non‑compensable claims, including medical‑only claims, have no effect on eligibility for the Claim‑Free Discount.

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