Workers Comp Advisory Rate Semi-rant – Look at Numbers

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Advisory Rate Semi-rant – The Numbers 

I apologize for my advisory rate semi-rant.   A Workers Comp Advisory rate is just that – advisory rates.  Much attention is given to the publication of advisory rates.  They actually mean nothing whatsoever to what any company in that state will pay for Workers Comp

Picture Of Hand Presenting Semi-rant Coins And Percentage
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insurance.

I have used advisory rates as a bellwether for certain states’ rates changes.  I recently posted an article on Iowa’s WC advisory rate increases.

The person or persons that actually decide what rates an employer will pay are:

  • Actuary
  • Underwriter
  • Senior Management

NCCI, the WCIRB, or any state rating bureau is not in the business of setting carriers’ rates.  Advisory rates are just that – advisory in function only.

Numbers On Cricket Scoreboard Workers Comp Advisory Rate Ground
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I will give you an example of how senior management for a company can offset rates.  As an example, let us say that Nebraska has decided to reduce their advisory rate 5% after a recommendation from NCCI.  The insurance carrier can then file to have their rate deviated from the advisory rate at 5%+.   This equals to a 0% rate decrease.

The deviated rate may also be called a LCM or Loss Cost Multiplier.  Some states call their workers comp advisory rates Loss Costs.  The insurance carriers will then file the LCM they wish to charge their insureds.  An example of a LCM is 1.21 which means the carriers wishes to file their rate at 21% higher than the advisory rate.

Insurance carriers can file a different deviated rate every year or under special circumstances.  Carriers are not locked into any rate deviation.  I have rarely seen an Insurance Commissioner or State Workers Comp Department reject a rate deviation or LCM.

The employers are left wondering what happened to the advisory rate decrease that was published earlier in the year.   There are certain carriers that may use advisory rates as their rate and not deviate from it.  I have rarely, if ever, seen this happen.

There is a certain insurance carrier that has filed for a 211% deviated rate for quite some time.  The carrier does take on very risky companies. That could be partially why they have filed such a high deviated rate.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt 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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