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Filing at a Glance

Company: NCCI

Product Name: R-1407 2013 Update to the Retrospective Rating Plan Parameters - State Hazard GroupDifferentials

State: Nevada

TOI: 16.0 Workers Compensation

Sub-TOI: 16.0004 Standard WC

Filing Type: Rule

Date Submitted: 05/29/2013

SERFF Tr Num: NCCI-129042899

SERFF Status: Closed-Approved

State Tr Num: 38200

State Status: Approved

Co Tr Num: R-1407 (CB)

Effective DateRequested (New):

01/01/2014

Effective DateRequested (Renewal):

01/01/2014

Author(s): Lesley O'Brien, Alison Herwig, Frank Gnolfo, Dennis Kokulak, Robert Dalton

Reviewer(s): Mr. Gennady Stolyarov II (primary)

Disposition Date: 05/29/2013

Disposition Status: Approved

Effective Date (New):

Effective Date (Renewal):

State Filing Description:

SERFF Tracking #: NCCI-129042899 State Tracking #: 38200 Company Tracking #: R-1407 (CB)

State: Nevada Filing Company: NCCI

TOI/Sub-TOI: 16.0 Workers Compensation/16.0004 Standard WC

Product Name: R-1407 2013 Update to the Retrospective Rating Plan Parameters - State Hazard Group Differentials

Project Name/Number: /

PDF Pipeline for SERFF Tracking Number NCCI-129042899 Generated 05/29/2013 06:42 PM

General Information

Company and Contact

Filing Fees

Project Name: Status of Filing in Domicile:

Project Number: Domicile Status Comments:

Reference Organization: Reference Number:

Reference Title: Advisory Org. Circular:

Filing Status Changed: 05/29/2013

State Status Changed: 05/29/2013 Deemer Date:

Created By: Frank Gnolfo Submitted By: Frank Gnolfo

Corresponding Filing Tracking Number:

State TOI: 16.0 Workers Compensation State Sub-TOI: 16.0004 Standard WC

Filing Description:

This item updates the Hazard Group Differentials (common referred to as Relativities) in NCCI's 2009 Edition of itsRetrospective Rating Plan Manual for Workers Compensation and Employers Liability Insurance (Retrospective Rating PlanManual).

Filing Contact InformationMaggie Karpuk, State Relations Executive [email protected]

30501 Agoura Road, Suite 201

Agoura Hills, CA 91301

818-707-8374 [Phone]

818-707-8387 [FAX]

Filing Company InformationNCCI

901 Peninsula Corporate Circle

Boca Raton, FL 33487

(561) 893-3186 ext. [Phone]

CoCode:

Group Code:

Group Name:

FEIN Number: 65-0439698

State of Domicile: Florida

Company Type:

State ID Number:

Fee Required? Yes

Fee Amount: $25.00

Retaliatory? No

Fee Explanation: Rule

Per Company: Yes

Company Amount Date Processed Transaction #

NCCI $25.00 05/29/2013 70662283







Correspondence Summary DispositionsStatus Created By Created On Date Submitted

Approved Mr. Gennady Stolyarov II 05/29/2013 05/29/2013







Disposition

Disposition Date: 05/29/2013

Effective Date (New):

Effective Date (Renewal):

Status: Approved

Comment:

Rate data does NOT apply to filing.

Schedule Schedule Item Schedule Item Status Public Access

Supporting Document Authorization Letter Yes

Supporting Document Filing Fees Yes

Supporting Document Filing Memorandum Yes

Supporting Document Workers' Compensation Rate Filing/Loss Costs Expense

Worksheet

Yes

Rate Exhibit 1 Yes

Rate Exhibit 2 Yes







Rate/Rule Schedule

Item

No.

Schedule Item

Status Exhibit Name Rule # or Page # Rate Action

Previous State

Filing Number Attachments

1 Exhibit 1 Hazard Group Differentials Replacement 31834 Exhibit 1 R1407.pdf

2 Exhibit 2 Development Replacement 31834 Exhibit 2 NV_R1407.pdf







NATIONAL COUNCIL ON COMPENSATION INSURANCE, INC. R-1407PAGE 3

EXHIBIT 1

RETROSPECTIVE RATING PLAN MANUAL—2009 EDITIONSTATE SPECIAL RATING VALUES

1. HAZARD GROUP DIFFERENTIALS(Applies in: AL, AK, AZ, AR, CO, CT, DC, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA, ME, MD, MI, MS,

MO, MT, NE, NV, NH, NM, NC, OK, OR, RI, SC, SD, TN, TX, UT, VT, WI, WV)

State A B C D E F G

AL 1.55 1.18 1.04 0.94 0.80 0.65 0.49AK 1.59 1.20 1.06 0.96 0.82 0.67 0.51AZ 1.88 1.43 1.25 1.12 0.96 0.76 0.57AR 1.79 1.37 1.20 1.08 0.93 0.75 0.58CO 1.96 1.49 1.33 1.20 1.04 0.84 0.66CT 1.48 1.11 0.98 0.88 0.75 0.61 0.47DC 1.72 1.30 1.14 1.03 0.88 0.71 0.55FL 2.07 1.59 1.41 1.28 1.11 0.89 0.63GA 1.54 1.17 1.03 0.93 0.80 0.64 0.49HI 1.99 1.50 1.33 1.20 1.04 0.85 0.67ID 1.71 1.31 1.17 1.06 0.93 0.76 0.60IL 1.26 0.96 0.87 0.78 0.68 0.55 0.45IN 1.82 1.39 1.25 1.13 0.99 0.81 0.65IA 1.63 1.23 1.09 0.98 0.84 0.68 0.53KS 1.74 1.33 1.18 1.06 0.91 0.74 0.58KY 1.69 1.28 1.13 1.01 0.87 0.70 0.53LA 1.33 1.00 0.89 0.80 0.69 0.57 0.44ME 1.71 1.29 1.14 1.04 0.90 0.73 0.58MD 1.54 1.16 1.02 0.92 0.79 0.64 0.48MI 1.74 1.31 1.18 1.07 0.93 0.77 0.60MS 1.80 1.37 1.21 1.09 0.94 0.76 0.59MO 1.88 1.45 1.30 1.17 1.01 0.82 0.64MT 1.66 1.27 1.12 1.00 0.86 0.69 0.53NE 1.67 1.27 1.12 1.01 0.87 0.71 0.55NV 1.63 1.23 1.08 0.97 0.83 0.66 0.50NH 1.51 1.14 1.01 0.91 0.79 0.64 0.50NM 1.62 1.23 1.09 0.98 0.84 0.69 0.54NC 1.36 1.03 0.92 0.82 0.71 0.57 0.44OK 1.47 1.12 0.99 0.89 0.76 0.61 0.48OR 2.22 1.67 1.48 1.34 1.15 0.94 0.73RI 1.88 1.42 1.26 1.14 0.98 0.80 0.63SC 1.67 1.27 1.13 1.02 0.88 0.71 0.56SD 1.70 1.30 1.14 1.03 0.88 0.71 0.55TN 1.62 1.23 1.10 0.99 0.86 0.70 0.55TX 2.56 1.96 1.75 1.57 1.35 1.10 0.83UT 1.73 1.31 1.15 1.04 0.89 0.72 0.55VT 1.66 1.26 1.11 1.00 0.86 0.70 0.55WI 1.62 1.22 1.10 0.99 0.86 0.71 0.57WV 1.87 1.43 1.26 1.13 0.97 0.79 0.62

Hazard Group

ITEM R-1407—2013 UPDATE TO RETROSPECTIVE RATING PLAN PARAMETERS—STATE HAZARD GROUP DIFFERENTIALS

© Copyright 2013 National Council on Compensation Insurance, Inc. All Rights Reserved.

NATIONAL COUNCIL ON COMPENSATION INSURANCE, INC. R-1407PAGE 4

ITEM R-1407—2013 UPDATE TO RETROSPECTIVE RATING PLAN PARAMETERS—STATE HAZARD GROUP DIFFERENTIALS

EXHIBIT 2

DEVELOPMENT OF NEVADA HAZARD GROUP RELATIVITIESFOR HAZARD GROUPS A TO G

Step 1. Historical experience is trended, on-leveled, and developed to estimate the severities for eachhazard group.

Step 2.

Step 3.

Step 4.

Step 1 Hazard Group Nevada CountrywideSeverities A 36,125 33,165

B 48,311 43,451C 55,479 49,480D 62,318 54,759E 73,901 63,626F 93,706 78,636G 133,193 99,716

Step 2 Claim Count = 23,683

Credibility = (23,683 / 155,000) ^ 0.5 = 0.391

Step 3 Hazard Group NevadaCredibility A 34,322 = (0.391)(36,125) + (0.609)(33,165)Weighted B 45,351Severities C 51,825

D 57,713E 67,642F 84,526G 112,802

Countrywide Overall: 55,954

Step 4 Hazard Group RelativitiesRelativities A 1.63 = 55,954 / 34,322

B 1.23C 1.08D 0.97E 0.83F 0.66G 0.50

The severities are weighted with the countrywide severities by hazard group using a credibility that varies by state. For this purpose, 155,000 claims are regarded as fully credible and the square root rule is used to compute partial credibilities.

Credibility weighted severities for each state hazard group are produced. A new countrywide average severity is calculated by taking the weighted average of the formula for state severities using claim counts as weights.

The relativities are calculated by dividing the countrywide severity by the individual state hazard group severities. The final relativities are derived by capping the indicated relativities at a 15.0% increase or decrease from the prior update.

Note: The underlying data source for the above calculations is NCCI's Statistical Plan for Workers Compensation and Employers Liability Insurance (Statistical Plan) , excluding medical-only claims. The Statistical Plan data for each state is adjusted accordingly, as reflected in the data underlying the Excess Loss Factor (ELF) calculation.


Supporting Document Schedules

Bypassed - Item: Authorization Letter

Bypass Reason: NAAttachment(s):Item Status:Status Date:

Bypassed - Item: Filing Fees


Satisfied - Item: Filing MemorandumComments:

Attachment(s): MEMO R-1407.pdfItem Status:Status Date:

Bypassed - Item: Workers' Compensation Rate Filing/Loss Costs Expense Worksheet








NATIONAL COUNCIL ON COMPENSATION INSURANCE, INC.(Applies in: AK, AL, AR, AZ, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS,KY, LA, MD, ME, MI, MO, MS, MT, NC, NE, NH, NM, NV, OK, OR, RI,SC, SD, TN, TX, UT, VT, WI, WV)

R-1407PAGE 1

FILING MEMORANDUM

ITEM R-1407—2013 UPDATE TO THE RETROSPECTIVE RATING PLAN PARAMETERS–STATEHAZARD GROUP DIFFERENTIALS

PURPOSE

This item updates the Hazard Group Differentials (commonly referred to as Relativities) in NCCI’s 2009Edition of its Retrospective Rating Plan Manual for Workers Compensation and Employers LiabilityInsurance (Retrospective Rating Plan Manual).

BACKGROUND

The Retrospective Rating Plan adjusts a risk’s premium for a policy according to the loss experience duringthe effective period of the policy. At the simplest level, an insured’s retrospective premium is determinedby the formula R = (b + cL) * T, where:

R = Retrospective premium, subject to minimum and maximum amounts

b = Basic premiumc = Loss conversion factor, generally reflecting loss adjustment expense

L = Actual incurred loss during the effective policy period

T = Tax multiplier

The retrospective premium, R, is not known until after the policy has expired and the actual losses arefully developed. The basic premium contains provisions for the expenses of the carrier. It also includesa net insurance charge, which results from the maximum and minimum limitations on the retrospectivepremium. The net insurance charge reflects the charge to compensate for the possibility that R will exceedthe maximum premium amount. It also reflects the savings resulting from the possibility that R will be lessthan the minimum premium amount. The net insurance charge is the difference between the charge forthe maximum and the savings from the minimum.

Appendix B—Table of Insurance Charges contains the excess ratios needed to quantify the insurancecharge and savings described above. The ratio of the loss limit to expected losses—the entry ratio—is usedto look up the values in the Table of Insurance Charges. The charges depend not only on the maximumand minimum subject losses, but also on the size of the insured. This is because the expected variationin losses is lower for larger employers.

Hazard Group Differentials

The variation in the loss ratios for employers in the lower hazard groups generally should be smaller than thevariation for employers in the higher hazard groups. The Hazard Group Differential factors adjust for thisdifference by placing lower hazard group employers in a higher Expected Loss Range and higher hazardgroup employers in a lower Expected Loss Range than would otherwise be the case. This adjustment affectsthe column selection in Appendix B—Table of Insurance Charges, which then impacts the basic premiumportion of the retrospective policy premium. The Hazard Group Differentials should be updated regularlyto reflect changes in the circumstances (e.g., state statutory benefit levels, inflation, etc.) underlying eachstate’s severity.

The enclosed materials are copyrighted materials of the National Council on Compensation Insurance, Inc. ("NCCI"). The use of these materialsmay be governed by a separate contractual agreement between NCCI and its licensees such as an affiliation agreement between you and NCCI.Unless permitted by NCCI, you may not copy, create derivative works (by way of example, create or supplement your own works, databases,software, publications, manuals, or other materials), display, perform, or use the materials, in whole or in part, in any media. Such actions takenby you, or by your direction, may be in violation of federal copyright and other commercial laws. NCCI does not permit or acquiesce such use ofits materials. In the event such use is contemplated or desired, please contact NCCI's Legal Department for permission.


NATIONAL COUNCIL ON COMPENSATION INSURANCE, INC.(Applies in: AK, AL, AR, AZ, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS,KY, LA, MD, ME, MI, MO, MS, MT, NC, NE, NH, NM, NV, OK, OR, RI,SC, SD, TN, TX, UT, VT, WI, WV)

R-1407PAGE 2

FILING MEMORANDUM

ITEM R-1407—2013 UPDATE TO THE RETROSPECTIVE RATING PLAN PARAMETERS–STATEHAZARD GROUP DIFFERENTIALS

Appendix A—Table of Expected Loss Ranges in NCCI’s Retrospective Rating Plan Manual is not beingupdated with this item. Typically, the Hazard Group Differentials and the Expected Loss Ranges are updatedat the same time; however, a review of recent changes in countrywide claim severities indicates that achange to the Expected Loss Ranges is not needed. The current Appendix A, which became effective onJanuary 1, 2013, will continue to apply.

PROPOSAL

It is proposed that the Hazard Group Differentials to NCCI’s 2009 Edition of its Retrospective RatingPlan Manual be revised.

Please note that this item is not being filed in Virginia at this time. The proposed changes in this item will beincluded in the Virginia April 1, 2014 loss cost filing.

IMPACT

Retrospective rating should produce premium that is equitably distributed to all insureds, but, on average,close to the guaranteed cost premium. The objective of the change in the Hazard Group Differentials is tomaintain the aggregate expected balance, although the impact will vary slightly for each insured employer.For most insureds electing retrospective rating, the impact on final premium from these changes is expectedto be minimal. The improved equity afforded by retrospective rating from this change will result in no changeto the insurance charges for the majority of insureds. The statewide impact will be negligible. The program isdesigned to be revenue-neutral countrywide.

EXHIBIT COMMENTS AND IMPLEMENTATION SUMMARY

Exhibit Exhibit Comments Implementation Summary1 Provides the State Hazard Group Differentials

2 Contains a description of the development ofthe differentials/relativities for each state. Asexplained in these exhibits, individual stateseverities, as well as countrywide severities, areused in the calculation of the relativities.

• In all states except Hawaii and Texas,this item will be implemented for new andrenewal voluntary policies effective on orafter 12:01 a.m. on January 1, 2014

• This item will be implemented in Hawaii’sloss cost filing proposed to be effectiveJanuary 1, 2014. The effective date isdetermined upon regulatory approval ofthe individual carrier’s election to adoptthis change

• In Texas, this item will be implementedfor new and renewal voluntary policieseffective on or after 12:01 a.m. onDecember 1, 2013

The enclosed materials are copyrighted materials of the National Council on Compensation Insurance, Inc. ("NCCI"). The use of these materialsmay be governed by a separate contractual agreement between NCCI and its licensees such as an affiliation agreement between you and NCCI.Unless permitted by NCCI, you may not copy, create derivative works (by way of example, create or supplement your own works, databases,software, publications, manuals, or other materials), display, perform, or use the materials, in whole or in part, in any media. Such actions takenby you, or by your direction, may be in violation of federal copyright and other commercial laws. NCCI does not permit or acquiesce such use ofits materials. In the event such use is contemplated or desired, please contact NCCI's Legal Department for permission.


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