When an employer is subject
to an experience modification, the modification must be shown
on the policy and applied to the premium developed by application
of basic manual rates. Additionally, an employer’s premium
can be further affected by the application of debits/credits
for individual risk characteristics, for example, premium
size, loss control programs etc. Note: all individual risk
characteristic are applied before the Experience Modification.
Q.What is a loss reserve?
A.A loss reserve is an estimated amount
of money that the insurance company sets aside to pay for
a claim. Loss reserves are used to evaluate the worth of
each claim, based upon the claims adjustor’s judgement and
experience in handling similar claims and the potential
for claims payment. Insurers are required by law and WCIRB
rules to establish these reserves for incurred claims.
Q.What is a workers’ compensation surcharge?
A.An insurance company may surcharge premium
if it believes that additional money is needed to meet expected
losses and expenses for a particular employer. Consumers
should ask the insurer to provide formal documentation that
reflects all the rating components used to develop their
premium. Surcharges are usually applied only to high- risk
activities with a higher-than-average loss potential.
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