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  #21  
Old 08-20-2019, 02:12 PM
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WC has an experience mod which is intended to adjust the average class experience (as reflected in the published bureau loss costs) for the recent past loss experience of an individual insured

there's a high level paper somewhere on the NCCI.com website that explains it, but i don't know where it is and don't have time to look for it. i suppose you could call their helpdesk and ask for it
I'm good with the individual risk rating. That is still covered pretty well in exam 5 material at least (and probably exam 8?). My 'loss experience' comment referred to that of classes or groups of classes. The modification factor is the answer, and how to come up with modification factor largely appears up to the company/actuary to derive. At least that's what I've gathered.
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Old 08-20-2019, 03:10 PM
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Originally Posted by ALivelySedative View Post
I'm good with the individual risk rating. That is still covered pretty well in exam 5 material at least (and probably exam 8?). My 'loss experience' comment referred to that of classes or groups of classes. The modification factor is the answer, and how to come up with modification factor largely appears up to the company/actuary to derive. At least that's what I've gathered.
the (usually) easier path is for the underwriters to use schedule rating, commonly +/-25%, to adjust the policy premium on a by-account basis.

it's different once you get to really large accounts
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Old 08-20-2019, 03:34 PM
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WC has an experience mod which is intended to adjust the average class experience (as reflected in the published bureau loss costs) for the recent past loss experience of an individual insured

there's a high level paper somewhere on the NCCI.com website that explains it, but i don't know where it is and don't have time to look for it. i suppose you could call their helpdesk and ask for it
Not sure if this is the one you're referencing but try this.
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Old 09-25-2019, 04:26 PM
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Anyone ever actually filed for a LCM <1.0? I haven't seen any, but it seems both plausible and justifiable if expected loss cost differences offset the expense load.
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Old 09-25-2019, 05:24 PM
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Anyone ever actually filed for a LCM <1.0? I haven't seen any, but it seems both plausible and justifiable if expected loss cost differences offset the expense load.
Yes. Not uncommon for companies with a tiering structure.
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Old 09-25-2019, 07:02 PM
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Yes. Not uncommon for companies with a tiering structure.
I have seen LCMs that were 3 too...

Tiering comes to mind or if ISO does a really bad job differentiating risks for some classes that really there isn't enough info.
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Old 09-26-2019, 08:37 AM
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Anyone ever actually filed for a LCM <1.0? I haven't seen any, but it seems both plausible and justifiable if expected loss cost differences offset the expense load.
Wouldn't be too surprising for a line with a long tail like comp or GL. You earn interest on the reserves for so long that the required UW profit can sometimes get pushed well into the negatives. If your expense load wasn't that big in the first place, the total LCM could end up less than 1 for the entire line.
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Old 09-26-2019, 09:40 AM
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Originally Posted by ALivelySedative View Post
Anyone ever actually filed for a LCM <1.0? I haven't seen any, but it seems both plausible and justifiable if expected loss cost differences offset the expense load.
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Originally Posted by therealsylvos View Post
Yes. Not uncommon for companies with a tiering structure.
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Old 09-26-2019, 10:11 AM
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Thanks fam.
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Old 09-26-2019, 05:09 PM
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Originally Posted by ALivelySedative View Post
Yes! Essentially why I have a question in the first place: Does one not account for company loss costs vs published industry loss costs? Are LCMs really derived solely from expenses? Are expenses tracked down to individual class codes? In general I think not (ime), so how are different multipliers devised for different class codes under the same line of business? This may be a simple case of bigger companies have more data than what I'm used to seeing, but I just don't know.
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You could use a Rate Departure Factor to reflect different experience. It gets multiplied in and results in a different LCM.
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Originally Posted by act_123 View Post
LCMs are in Bahenman text in exam 8.

Either way traditionally they don't include adjustments for loss experience. However, many companies include a deviation on top of them sometimes embedded in the LCM or as a different factor that incorporate it. I have seen it both ways.

So yes in many cases it does include loss experience.
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Originally Posted by ALivelySedative View Post
Anyone ever actually filed for a LCM <1.0? I haven't seen any, but it seems both plausible and justifiable if expected loss cost differences offset the expense load.
At an insurance company I once worked for we often filed for an ancillary line of business that agents sold when producing the main products. We would use some sort of advisory rates but would apply a LCM to get loss costs to the gross amount. However, we would use what we called a LCMF (Loss Cost Modification Factor) to deviate from the underlying industry/advisory/bureau rates. This was assumed to be 1.000 unless we supplemented the filing with an analysis demonstrating that our company loss costs were statistically different in some way which resulted in a need to raise or lower the loss cost assumption.

The LCM would capture our company expense ratio and profit provision as 1/(Permissible Loss Ratio).
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