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Sliding Scale Dividend Plans Are Loss Sensitive Policies


Sliding Scale Dividend Plans Definition

In workers comp insurance, Sliding Scale Dividend Plans are established to return a portion of the premium to the policyholder if the losses are better than expected and a dividend is declared. This is a type of Loss-Sensitive Policy.   Loss sensitive policies have been know to dramatically increase premiums in certain cases.

Workers assembling rebar Sliding Scale Dividend Plans for water plan
Wikimedia Commons – Tomas Castelazo

In a sliding scale plan, the size of the dividend slides up or down according to the loss experience (incurred losses/premium paid). This amount is returned to the insured business after the policy expires.

Sliding Scale Dividends are very state-specific. Dividends are not guaranteed and are paid based on the ratio the final audited premium has to the total incurred losses of the insured for the policy period.

These plans an be variable.

A policy year dividend depends on your earned premium and your loss ratio during that year.  The dividend grows as your premium increases and your loss ratio declines. The formula might look something like this:

Dividend = final audited premium / loss ratio

NCCI has created its own table for dividend plans.  The table is behind a paywall.   Therefore, I cannot provide it here.

Each state has very specific rules on this type of plan.

Also Read: What Is A Guaranteed Cost Program In Workers Compensation?

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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