Are Workers Comp Rating Bureaus Responsible For Rating Mistakes
Most Workers Comp Rating Bureaus are only as good as the data the organizations receive from the carriers.
The data progression on final rates in uncomplicated terms is:
- Workers Comp Rating Bureau (NCCI, WCIRB or State Independent) receives data from carriers and member organizations
- The bureau’s actuaries compile that data – see Unit Statistical Date for more info
- Rates are calculated from extrapolations of this data using current and previous filings by the carriers
- Insurance carriers can deviate from those rates using loss cost multipliers for any classification code
- Employers pay those carriers’ rates in the policy and at the premium audit.
Let us follow along using the numbers from the above inset to see how this occurred in the Keystone State.
Number 1
Very recently, the Pennsylvania Workers Comp Rating Bureau produced a press release that was covered extensively and exclusively by WorkCompCentral. One of the major carriers allegedly reported their Unit Stat wrong (it happens).
Number 2
The PCRB melded though numbers into their actuarial numbers when the data was compiled.
Number 3
Inflated rates were calculated from those numbers. The carrier was large enough to cause over a $250,000,000+ overcharge (wow) to the insureds in Pennsylvania.
Number 4
Insurers can deviate from those rates using Loss Cost Multipliers to decrease or usually increase the Loss Costs (pure premium rates). The loss costs are usually calculated internally by the carrier’s actuaries with recommendations from the underwriters. One can not be sure if the carriers adjusted the bureau’s erroneous lost costs or used the same Loss Cost Modifiers regardless.
Number 5
The insured employers take the brunt of the erroneous filings by overpaying their premiums based on the erroneous rates.
Questions
My question was and it was posed to the PCRB – why was this large error not caught when the data was reported. The rating bureau said that it was in the range of the allowable data as set by their actuaries. Followup question – were the ranges too large?
My next question would be – How will this Workers Compensation Rating Bureau data error be fixed so that the state’s insureds will see some relief from the overcharges. The PCRB decided to initiate a 10%+ loss cost rate reduction to offset the data error. Then again, what if the carriers adjusted their rates for the increased loss cost rates? Would the carriers then have to readjust their rates again and refile those loss cost multipliers with the Department of Insurance?
My next question is did the carrier (anonymously reported by PCRB) redo all of their prior filings? Yes, they did, so did the insured employers will receive refunds when these new filings occur?
Moral Of The Story
The moral of the article is to always question anything that does not look right with your workers compensation policy; any endorsements during the policy period; your premium audit and bill; loss runs; experience modification factor; or any part of not just your WC policies.
Sometimes even the wrong data comes from the workers compensation rating bureaus.
Related: Rating Bureau Rates Have Little Effect on Policies
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