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Workers Comp

  • Payroll (exposures)
  • Classification Codes (based on riskiness)
  • Manual Rate (per $1000 of payroll, coverage)
    • Depends on classification codes
  • \(\text{Manual Premium} = \dfrac{\text{Payroll}}{1000} \times \text{Manual Rate}\)
  • Experience Mod factor
    • \(\gt 1\) worse-than-usual loss experience \(\implies\) surcharge
    • \(\lt 1\) better-than-usual loss experience \(\implies\) discount
  • Standard Premium
    • \(= \text{Manual Premium} \times \text{E-mod factor}\)

Process

Summary

Manual prem \(\to\) Modified prem \(\to\) Standard prem \(\to\) Guaranteed Cost prem

  1. For each combo of location and class \(\to\) Manual rate \(\times\) \(\dfrac{\text{Payroll}}{100} =\) Manual Premium
  2. If qualified for Experience Rating, Manual premium \(\times\) Experience mod-factor \(=\) Modified Premium
  3. If qualified for Schedule Rating, Modified premium \(\times\) Schedule mod-factor \(\to\) Round to the penny \(\to\) Standard Premium
  4. Calculate Premium Discount \(\to\) Apply to Standard premium (Round up to the dollar)
  5. Add Expense Fee
  6. \(\min(\text{Step 5 result}, \text{Minimum Premium})\) \(\to\) Guaranteed Cost Premium