1. Premium
     
    1. Subject Premium

      A risk's eligibility for this Plan is based on the amount of subject premium as referenced in Rule 1-C-7. Refer to Rule 2-A-2.
       
      Note: A policy shall not be canceled, rewritten, or extended for purposes of enabling a risk to qualify for, or avoid application of, this Plan.

    1. Other Than Subject Premium

      The following are not included in subject premium for the determination of premium eligibility under this Plan:
      1. Expense Constants
      2. The policy minimum premium
      3. Premium under the National Defense Projects Rating Plan
      4. Premium under "Atomic Energy"”
      5. Premium developed under Three-Year Fixed Rate policies
      6. Premium for Terrorism
      7. Premium for Natural Disasters and Catastrophic Industrial Accidents
      8. Workers Compensation Security Fund surcharge
      9. New York State Assessment
      10. Other premium elements not subject to experience rating according to the Statistical Plan
         
  2. Subject Premium Eligibility Amounts

A risk qualifies for experience rating under this Plan:

  1. if the payroll or other exposure within the latest 24 months of the experience period produces a subject premium at authorized rates of at least $10,000, or,

  2. if the payroll or other exposure within the experience period of more than 24 months produces an average annual subject premium at authorized rates of at least $5,000.

    Note: Authorized rates are carrier rates specifically approved by the New York State Department of Financial Services.
  1. Average Annual Subject Premium

A risk's average subject premium on an annual basis is determined for experience rating eligibility purposes as follows: 

Total Subject Premium  

 x 12 = Average Annual Subject Premium
Total Months of Experience in Experience Period
(excluding gaps in coverage)
 

The reference to total months of experience in this calculation includes partial months.

  1. Intrastate Experience Rating

A risk qualifies for experience rating on an intrastate (New York only) basis when it meets the premium eligibility requirements as defined in Rule 2-A-2. Qualifying subject premium is based on payroll or other exposure reported in accordance with the Statistical Plan.

  1. Interstate Experience Rating
  1. A risk qualifies for experience rating on an interstate (multi-state) basis when it:
    1. Meets the premium requirement for intrastate rating in any one state, and
    2. Develops experience during the experience period in one or more additional states where this Plan permits combination for interstate rating.
       
  2. The experience developed in each additional state does not have to meet the premium requirement for intrastate rating.

  3. The interstate modification applies to all of the risk's operations even if coverage is written under separate policies.

  4. If a risk expands operations into one or more additional states, its experience rating modification applies to the additional state(s) operations as of the date of expansion. Experience for such operations will be included in the calculation of future modifications.

  5. Interstate experience modifications are calculated and issued by the National Council on Compensation Insurance, Inc. (NCCI).
  1. The Rating Effective Date appears on a risk's experience rating worksheet. It is the earliest date that a specific experience modification is applied to a policy. To determine experience rating modification application, refer to Rule 4-C.

    The Rating Board establishes the rating effective date. In most cases, a risk's rating effective date is the same as its Policy Effective Date.

    Note: Wrap-up policies are not used to determine rating effective dates. Refer to Rule 5-A-4 for information on wrap-up policies.
  2. The rating effective date may differ from a risk's Policy Effective Date for reasons including,but not limited to:
    • Short-term policies
    • Cancellations
    • Gaps in coverage
    • Changes in ownership or combinability status
    • Multiple policy effective dates
    • Interstate operations
    • A policy that is longer than one year and 16 days
    • Late receipt of current policy information by the Rating Board
  3. To determine a risk's rating effective date, the Rating Board will apply the Rating Effective Date Determination Table in conjunction with a review of the most recent full-term policies and unit statistical data. For purposes of this rule, a full-term policy is considered to be written for 12 months and is not cancelled prior to its expiration date.
     

Rating Effective Date Determination Table

If the risk is... Then the rating effective date is...
A single policy intrastate or interstate risk, or A multiple policy intrastate or interstate risk with all policies having the same effective date The effective month and day of the most recent full-term policy in effect and each policy thereafter unless the date is changed due to a reason listed above.
A multiple policy intrastate risk with policies having different effective dates The effective month and day of the most recent full-term policy in effect with the largest amount of estimated standard premium.
A multiple policy interstate risk with polices having different effective dates The effective month and day of the most recent full-term policy in effect for the state with the largest amount of estimated standard premium.

    Refer to Supplement and Examples section for examples.

C. ELEMENTS OF THE EXPERIENCE RATING FORMULA AND WORKSHEET

  1. Expected Loss Rate (ELR)
    The Expected Loss Rate (ELR) is a factor applied to each $100 of payroll (or to non-payroll exposure) for a classification. It determines the amount of expected losses for a classification.

    ELRs are listed in the Tables of Expected Loss Rates and Discount Ratios in this Plan.

  2. Expected Losses
    The Expected Losses for each classification are determined by multiplying the payroll divided by 100 times the ELR. For a non-payroll class, the class's exposure is multiplied by the ELR. The result is rounded to the nearest whole number. Within the experience rating calculation, the expected losses represent the benchmark level of losses expected for all employers in a state within a particular classification. It is against this benchmark that individual employers are compared, based on their actual losses.

    Note: In determining the experience modification for risks qualifying for credits under the New York Construction Classification Premium Adjustment Program (NYCCPAP), expected losses are determined based on expected losses before reduction by the percentage of the NYCCPAP credit given, and the weighting and ballast values are determined based on the unadjusted expected losses.

    In determining the experience modification for risks subject to the New York Payroll Limitation Law, expected losses are based on limited payrolls, and the weighting and ballast values are determined based on the expected losses calculated using the limited payrolls.
  1. Discount Ratio (D-Ratio)
    The Discount Ratio (D-Ratio) is a factor applied to the expected losses for each classification that are Expected Primary Losses.

    Discount ratios are listed in the Tables of Expected Loss Rates and Discount Ratios in this Plan.

  2. Primary/Excess Split Point Value
    The dollar value which splits a loss into its primary and excess portions is known as the primary/excess split point. This value can be found in the Experience Rating Values section under Table II – Weighting Values (W).

  3. Expected Primary Losses
    Expected Primary Losses for each classification are determined by multiplying the Discount Ratio times the expected losses. The result is rounded to the nearest whole number. Within the experience rating calculation, the expected primary losses represent the benchmark level of primary losses for all employers in state within a particular classification. It is against this benchmark that individual employers are compared, based on their actual primary losses.

  4. Expected Excess Losses
    Expected Excess Losses are determined by subtracting the total expected primary losses from the total expected losses. Within the experience rating modification calculation, the expected excess losses represent the benchmark level of losses in total, for the portion of each claim in excess of the primary/excess split point value. It is against the benchmark that individual employers are compared, based on their actual excess losses.

    Refer to Table II of the Experience Rating Values pages of this Plan for the applicable primary/excess split point value.

  5. Actual Incurred Losses
    For purposes of experience rating, Actual Incurred Losses are those reported according to the Statistical Plan. Incurred losses include both paid amounts and carrier established reserves on each claim.

  6. Actual Primary Losses
    Actual Primary Losses are the portion of the actual incurred losses that are used at full value in the experience rating calculation. For each actual incurred loss, the amount up to the primary/excess split point value is considered primary in New York.

    Refer to Table II of the Experience Rating Values pages of this Plan for the applicable primary/excess split point value.

  7. Actual Excess Losses
    Actual Excess Losses are determined by subtracting the total actual primary losses from the total actual incurred losses. Within the experience rating calculation, the excess portion of a loss reflects its severity and is given partial weight based on the size of the risk. As risk size increases, so does the amount of the actual excess losses used in the calculation.

  8. Weighting (W) Value
    The Weighting Value is a factor that is applied to a risk's actual excess losses, with the complement of the W value (1.00 - W) applied to the expected excess losses. The weighting value determines how much of actual excess losses and expected excess losses are used in an experience rating. The weighting value is based on the total expected losses of the risk and increases as expected losses increase. These values may be obtained from the Table of Weighting Values in this Plan.

  9. Ballast (B) Value
    The Ballast Value is a stabilizing element designed to limit the effect of any single loss on the experience rating modification. It is added to both the actual primary losses and expected primary losses. The ballast value is based on the total expected losses of the risk and increases as expected losses increase. These values may be obtained from the Table of Ballast Values in this Plan.

  10. Stabilizing Value
    The Stabilizing Value is a term used to describe the combined effect of the weighting and ballast values on the experience modification and is determined as follows:

                                                     Expected Excess Losses x (1 - Weighting Value) + Ballast Value

    The stabilizing value is included in both the actual and expected portions of the experience rating calculation formula. It limits the potential for significant variances in the experience rating modification factor from one year to the next. Its most significant impact is on smaller risks, which have a greater likelihood for severe swings in experience rating modification factors.

  11. Ratable Excess
  1. Expected Ratable Excess Losses
    Expected Ratable Excess Losses are determined by multiplying the complement of the weighting value (1.00-W) times the expected excess losses. The result is rounded to the nearest whole number. Within the experience rating calculation, the expected ratable excess losses represent, in total, the benchmark level of excess losses for all similarly classified employers. It is against this benchmark that individual employers are compared, based on their actual ratable excess losses.

  2. Actual Ratable Excess Losses
    Actual Ratable Excess Losses are determined by multiplying the weighting value times the actual excess losses. The result is rounded to the nearest whole number. For each actual incurred loss exceeding the primary/excess split point value, only that portion of the loss amount above the primary/excess split point value (the excess portion) is used. Within the experience rating calculation, the actual ratable excess losses represent, in total, the amount of actual excess losses to be used in the experience rating formula.

    Refer to Table II of the Experience Rating Values pages of this Plan for the applicable primary/excess split point value.
  1. Ratable Excess Limitation of Losses Employed in a Rating
    To reduce the effect of unusual or catastrophic occurrences on the experience modification, losses are limited to per claim, or multiple claim, limitations that can be found in the Table of Weighting Values.
  1. Single and Multiple Claim Limitation
     

Basic Loss Limitation Table

If… Then…
An accident involves only one person, or is an employers liability only loss
  • The loss is subject to per claim accident limitation
  • The actual primary loss is subject to the maximum primary value of the primary/excess split point value, even if the loss does not exceed the per claim accident limitation


Loss Limitations for Accidents Involving Two or More Persons - Table 1

If an accident involves two or more persons, and… Then…
The total of the losses exceeds the multiple claim accident limitation
  • The total losses are subject to the multiple claim accident limitation
  • The actual primary loss for these accidents is limited to a total of two times the primary/excess split point value.
The total of the losses does not exceed the multiple claim accident limitation, and none of the individual losses within the total exceeds the per claim accident
  • The individual losses are used at full value
  • The total actual primary losses for the accident are limited to two times the primary/excess split point value.


Loss Limitations for Accidents Involving Two or More Persons - Table 2

If an accident involves two or more persons, and the total of the losses does not exceed the multiple claim accident limitation, but an individual loss within the total exceeds the per claim accident limitation, and…

Then, the individual loss is limited to the per claim accident limitation and…

The total of the remaining losses exceeds the primary/excess split point value.
  • The remainder of the losses are used at full value
  • The total actual primary losses for the accident are limited to two times the primary/excess split point value.
The total of the remaining losses does not exceed the primary/excess split point value
  • The remainder of the losses are used at full value
  • The actual primary loss is limited to the primary/excess split point value for the individually limited loss
  • No actual primary loss limitation applies for the remainder of the losses
  1. Disease Loss Limitation  

    Disease losses are subject to per claim and multiple claim limitations. A limitation on total disease losses may also apply to an individual policy. This is in addition to the claim limitations already applied to individual disease losses under Rule 2-C-13-a.
     

    1. To apply the disease loss policy limitation: 

      1. Determine if a risk's individual policy total limited and non-limited actual incurred disease losses exceed the policy disease limit of triple the per claim accident limitation shown in the Tables of Weighting Values, plus 120% of the risk's total expected losses for the experience period. If the risk-specific threshold is exceeded, the disease losses are limited to such threshold, and:

      2. The actual primary losses are limited to two times the primary/excess split point value, plus 40% of the risk’s total expected primary losses for the experience period, rounded to the nearest whole number.
         
    2. A policy's total disease losses may not meet the risk-specific policy limitation amount as determined in (1)(a) above, but exceed the limitation shown in (1)(b). In such circumstances, Rule 2-C-13-a applies.

    3. For risks that do not have an experience period of 36 months, determine policy disease losses as follows: 
     
    To determine the… Combine the disease losses of all policies within the experience period having an effective date…
    Most recent policy year Within 24 months prior to the rating effective date
    Middle policy year More than 24 months but not exceeding 36 months prior to the rating effective date
    Oldest policy year More than 36 months prior to the rating effective date

D. EXPERIENCE RATING FORMULA

  1. The experience rating modification formula is used to determine the experience rating modification for all risks eligible for experience rating.
Primary + Ratable Excess +                          Stabilizing Value                         =   Totals  
                 
Actual
Primary
Losses
+ Weighting Value
Times
Actual Excess Losses
+ Ballast
Value
+ (1 Minus Weighting Value)
Times
Expected Excess Losses
  Total A

=
Expected
Primary
Losses
+ Weighting Value
Times
Expected Excess Losses
+ Ballast
Value
+ (1 Minus Weighting Value)
Times
Expected Excess Losses
  Total B

For the experience modification factor, divide Total A by Total B; round to two decimal places.

  1. Maximum Debit Modification

    Experience rating modification factors determined by the formula in Rule 2-D-1 are subject to a cap if the debit modification exceeds a specific amount. The risk-specific maximum debit modification is determined by formula and will be noted on the rating worksheet.

  2. United States Longshore and Harbor Workers Compensation Act Coverage (USL&HW)

    Experience ratings containing classifications where the rates include coverage under the USL&HW Act are calculated using the formula described in Rule 2-D-1.

Classifications subject to the USL&HW Act, but not followed by the letter "F" in the Table of Expected Loss Rates and Discount Ratios, have their expected losses determined by applying the USL&HW Act percentage, found on Page 5 of the Table of Expected Loss Rates and Discount Ratios, to the expected loss rate (ELR) for such classifications.

  

E. EXPERIENCE TO BE USED IN A RATING

  1. Experience Period

    Experience rating uses past payroll and losses to predict future losses. The experience period represents the total amount of this data used in an experience rating. The calculation of a risk’s experience rating modification must include all eligible experience developed during the experience period.
    1. A risk’s rating effective date determines its experience period. Experience for each of a risk’s policies is included if the policy effective date is:

      (1) Not less than 21 months before the rating effective date, and
      (2) Not more than 57 months before the rating effective date.
    2. A risk’s experience period cannot contain more than 45 months of data. The 45-month limitation is a maximum period of time between the expiration date of the most recent policy and the effective of the oldest policy. While the experience period may not exceed 45 months, an experience rating modification may be produced with less than 12 months of data. The amount of data included in a risk’s experience period may be impacted for reasons including, but not limited to:

      1. Short-term policies
      2. Cancellations
      3. Gaps in coverage
      4. Changes in ownership or combinability status
      5. Rating effective date changes
      6. Multiple policy effective dates
      7. Policies longer than one year and 16 days
      8. Wrap-up policies
      9. Interstate operations

    3. If both the recent and oldest policies fit within the experience period, and the inclusion of both polices would exceed 45 months, the oldest policy is not used.

    4. Based on a risk’s rating effective date:

      1. A risk’s most current data, excluding 4th through 10th reports, is used to calculate experience rating modifications. Refer to the Statistical Plan for valuation date information.

      2. An individual policy’s 1st, 2nd, and 3rd report data may be used in more than three experience rating modifications. However, the policy must be eligible for inclusion according to Rule 2-E-1-a, b and c.

  2. Self-Insurer Data 
    1. Experience of self-insured risks may be included in an experience rating upon written request to the Rating Services Division of the Rating Board. There is a fee for this service. Refer to ‘Products’ on the Rating Board’s web site, www.nycirb.org for a schedule of these charges.

    2. Payroll and loss data must be submitted to the Rating Board in an approved format (see ERM-6 Form in Appendix). The ERM-6 Form must be signed by either the risk, self-insurer or authorized thirdparty administrator (TPA). The data is subject to verification by the entity submitting the data for inclusion in an experience rating, as well as by the Rating Board.

    3. The insurer requesting the data inclusion must be the risk’s insurer during the time for which the modification including the self-insured data would apply.

    4. For multiple insurer risks, agreement from only one of the risk’s insurers, during the time for which the modification would apply, is required.

  3. Discontinued Operations

    An entity may discontinue all or part of its operations.

    If an entity discontinues… Then the future experience ratings will include…
    All of its operations and reestablishes them at a later date The applicable data developed prior to the discontinuation.
    Part of its operations The applicable data developed both:
    prior to the discontinuation,
    and for the remaining operations


  4. Insolvent Carriers

    1. Experience ratings may be promulgated by the Rating Board using data reported by those insolvent carriers that continue providing sufficient complete levels of unit statistical reports for experience rating purposes.

    2. When an insolvent carrier is unable to submit unit statistical reports for the policies it has written, experience ratings will be issued by the Rating Board if the experience required for rating purposes is submitted by the liquidator, an authorized Managing General Agent (MGA) or TPA, or by the insured using an ERM-6 Form.

    3. Data obtained from insolvent carriers that has been submitted later than the customary due date schedule for unit statistical reports, or insolvent carrier data obtained from third party sources, will be utilized in calculating experience ratings to the extent that the submitted data impacts the current and, if applicable, up to two preceding experience ratings. Refer to Rule 4-B-2-a-3 of this Plan.

    4. When absolutely no insolvent carrier unit statistical report data can be obtained, the following steps will be taken:

      • If a first report (exposure record) is unobtainable, an experience rating will be calculated without the policy that is missing the first report.

      • If a subsequent report(s) is missing, and the prior report(s) has been submitted to the Rating Board, experience ratings will be calculated using the prior report(s) data.

      • If an experience rating cannot be issued due to multiple years with missing data from an insolvent carrier, the last authorized rating factor will continue to apply.

When an insured's premium is less than the amount necessary to qualify for interstate or intrastate experience rating, but is greater than the minimum premium, a merit rating factor will apply to the New York manual premium. This factor is based on the number of indemnity and medical claims incurred by the insured during the most recent three-year period for which statistics are available. Cases to be counted as claims are defined as those which have been paid (totally or partially), or for which a reserve has been established. The three-year period is that which would otherwise be used for experience rating purposes.
 
The following schedule is used in determining the appropriate merit rating factor:
 
Number of Claims Merit Rating % Merit Rating Factor
0 - 8%   .92  
1 0%   1.00  
2 +4%   1.04  
3 or more +8%   1.08  
 
The Rating Board determines the appropriate factors and provides the carriers with a list of their insureds for whom a merit-rating factor was calculated. Rating worksheets are not provided for merit rating factors.
 
The New York Merit Rating Endorsement (WC 31 04 02) and the New York Merit Rating Revision Endorsement (WC 31 04 07) must be attached to each policy that is subject to the Merit Rating Plan.