California's Experience Rating System
If a business is experience rated, a completed Experience Rating Form (also referred to as an Experience Rating Worksheet) is provided to its insurer when a policy is written. A completed Experience Rating Form provides detailed information about the classification codes assigned to a policy by the WCIRB, the payroll reported for each of those classifications, summaries of claims amounts, and the experience modification.
Obtaining an Experience Rating Form is the best way for a company to see the data that the WCIRB has on file. Typically, copies of this form are available by contacting your insurer or insurance professional. A policyholder may obtain a copy of its experience rating form once per year at no cost through the Experience Rating Worksheet Request. (Insurers, agents and brokers can sign up or log in to WCIRB Connect to access ratesheets and inspection reports online. Refer to the Policyholder Data Products page for more information about ordering hard copies of ratesheets.)
Please note: The sample data in the form below is intended for demonstration purposes only.
This section of the Experience Rating Form contains the information necessary to identify the employer, the insurer and policy, and other infomation pertinent to the application of the experience modification.
Appearing below the company name and address are the classifications (other than 8810, Clerical Office Employees, and 8742, Salespersons-outside) that have been assigned to the company by the WCIRB.
The effective date of the experience modification will normally correspond with the effective date of the policy. If, however, the employer's policies have not incepted on the same day every year, a correction to an experience modification has been issued, or the operations are covered by more than one policy with different coverage dates, the effective date may differ from the policy inception date.
The issue date is the date that the worksheet was originally released by the WCIRB to the insurance company.
The worksheet shows the insurer, insurer group, policy number and issuing office.
This is the maximum primary loss value used in the calculation. The Primary Threshold is determined based upon the total expected losses for the experience period. The Expected Loss Rates can be found in the Publications and Filings section of the WCIRB website.
Payroll and loss information on the worksheet is grouped by policy. The insurer code for the insurer that wrote the policy and the policy year is shown above the payroll and claims information for that policy. For information about the insurer codes used by the WCIRB, see WCIRB Insurer Codes.
The classifications listed on the Experience Rating Form represent the operations of the business during the experience period.
The worksheet shows the payroll by classification code, reported for policies beginning within the experience period. Payroll is associated with the year in which your policy began, not necessarily the year in which it was paid. For example, for a policy that is in effect from December 31, 2015 to December 31, 2016, the payroll is reported for 2015, even though most of the payroll is paid in 2016.
The Expected Loss Rate reflects the anticipated average cost of benefits, per $100 of payroll, for a classification during the experience period. Expected Loss Rates are subject to change yearly. For example, the 2017 Expected Loss Rate for Classification 7219, Trucking Firms, is $4.18. In other words, for every $100 of payroll, the average cost of benefits resulting from workplace injuries assigned to Classification 7219 during the experience period was $4.18. The Expected Loss Rates can be found in the Filings and Plans section of the WCIRB website.
Expected Losses are determined by multiplying total payroll (per $100) for each classification by the Expected Loss Rate. This amount reflects an estimate of the cost of losses expected to arise during the experience period for your company based on the payroll reported for each classification.
The Discount Ratio (D-Ratio) is the mechanism used to divide Expected Losses into Primary and Excess amounts. See "Expected Primary Losses" below. The difference between the D-Ratio for each classification reflects differences in the severity of claims by classification. In other words, the severity of the average claim for some classifications is significantly higher (indicating a more severe injury) than that of the average claim found in other classifications. There are over 90 different D-Ratios for each classification based upon the Primary Threshold. The D-Ratios is subject to change yearly. D-Ratios can be found in the Filings and Plans section of the WCIRB website.
Expected Primary Losses are determined by multiplying the Expected Losses for a classification by the D-Ratio for the classification. There are over 90 different D-Ratios for each classification based upon the Primary Threshold. Primary Expected Losses are totaled for all classifications and the difference between the Total Expected Losses and the Primary Expected Losses is the Expected Excess Losses.
The Expected Excess Losses is the difference between the total Expected Losses and the total Primary Expected Losses. This number represents average excess losses expected for similar-sized employers within your classification.
This column shows the claim number(s) reported by the insurer. Claims under $2,001 are usually grouped together to save space on the form. If claims are grouped, the number in the Injury Type/# of Claims column will show the number of claims that have been grouped.
This column shows the injury type codes assigned and reported by the insurer. This detail does not affect the experience modification calculation; it is for informational purposes only. Injury type codes are found in Part 4, Section V, B. Loss Data Elements, Rule 3 of the California Workers' Compensation Uniform Statistical Reporting Plan - 1995.
This column indicates whether or not the claim was reported as Open or Closed when the claim was last valued. This detail does not affect the calculation. It is for informational purposes only.
Actual Losses shows the total claims value (medical and indemnity) as of the last valuation date. For information about claim valuation dates, see Unit Statistical Reports. Actual Losses are totaled for all claims.
The total amount of the claim value up to the Primary Threshold is the Actual Primary Loss amount. (Any remaining amount is Excess.) Claims under $2,001 are grouped together to save space on the form. Actual Primary Losses are totaled and this figure is subtracted from the Actual Losses to determine the Actual Excess Losses.
Various expected and actual loss columns are totaled. These amounts represent the totals for the experience period and will be used in the experience modification calculation.
This is the experience modification that is the product of the experience rating calculation shown on the form. It is effective as of the Effective Date shown at the top of the worksheet.
The Loss-Free Rating is the experience modification that would have been calculated if $0 (zero) actual losses were incurred during the experience period. This hypothetical rating calculation is provided for informational purposes only.