Term Of The Day – D Ratio
A D Ratio is a variable used in a workers compensation experience rating plan. It is applied to the expected losses to determine what percentage of those expected losses are to be considered as primary losses within the rating formula.
Once discovered, the D-Ratio is the ratio of primary expected losses to the total expected losses for any certain classification code. It is then used on a workers compensation experience modification factor (emod) worksheet.
The D-Ratio is important because the experience rating formula splits injury cost between a primary amount and the remainder. Because primary losses are given more weight in determining the experience rating modification than are excess losses,it is an important factor to determine.
One can think of the Excess Losses as the discounted losses beyond a split point. A split point
D-Ratios are produced by a rating bureau and published in that bureau’s experience rating plan manual. Each one varies by state and classification code.
The ratio cannot necessarily be disputed as they are attached to the associated Classification Code. The ratio is calculated from a set of actuarial formulas used by each state rating bureau, WCIRB, or NCCI.
©J&L Risk Management Inc Copyright Notice