LCF Designation Question – Workers Comp Policy
We have received this question in the last month from two risk management consultants. What does the LCF designation stand for in our Workers’ Comp policies? The question pops up now and then when talking with larger companies.
One definition covers Retrospective Rating Plans and the other covers PEO policies usually in California.
LCF Designation – Retrospective Rating Plans
The LCF designation here can be written as L/C/F. The term is defined by the workers’ comp rating bureaus – (NCCI, WCIRB, and others) as:
Loss Conversion Factor – The loss Conversion Factor is a claims handling fee included for the administrative cost the carrier assumes when handling the claims. The Loss Conversion Factor is usually a percentage of losses, typically 10 percent to 15 percent. Tax Multiplier reflects state premium taxes, licenses, fees, and miscellaneous assessments that the insurer must pay on the premium it collects.
Your policy – which you probably already know – is a retrospective policy. The retrospective premium usually referred to as retro premium has the LCF designation as one of its main components.
The WCIRB (CA) provides a great example of a retro premium policy here. The example covers 49 pages and is CA-specific. The terms covered are a great place for reference.
In PEO Policies
One of the lesser-known terms that causes confusion is the LCF contained in PEO policies. PEOs are Professional Employer Organizations. NAPEO provides a great definition:
PEOs provide human resource services for their small business clients—paying wages and taxes and often assisting with compliance with myriad state and federal rules and regulations. In addition, many PEOs also provide workers with access to 401(k) plans, health, dental, and life insurance, dependent care, and other benefits not typically provided by small businesses.
In PEO policies, the Client policy in name of Labor Contractor AND “Leased Coverage For” or the acronym “LCF” is followed by the client’s name in Item 1 of the policy (declarations page)
An “LCF” designation (“Leased Coverage For”) in the far left box on a WCIRB coverage sheet reflects an approved
arrangement where the employees of a leasing company are covered while working at a client of the leasing company. For example: “ABC LEASING, INC. LCF A-1 TIRES & DONUTS” means the insurer of ABC Leasing has agreed to provide coverage to ABC’s client (Tires & Donuts), which will be specifically listed within the insurance policy.
You may see the LCF designation on any certificates of insurance issued by the carrier or you may also see the PEO’s name as the first line of the insured with the A-1 Tires and Donuts listed second.
This LCF designation on the Dec Pages sometimes appears in other states than California.
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