The first step in determining your discount/surcharge is calculating your weighted loss ratio.
Weighted Loss Ratio (WLR): The ratio of capped costs to base premiums, weighted by year. To recognize emerging trends and improved safety performance, more weight is applied to the most recent year in the evaluation window as follows:
The WLR is then used to calculate your base discount/surcharge. This is done by comparing your WLR to the industry WLR.
If your WLR is better than the industry you could receive a discount. For every 3.33% better than the industry, you could receive up to 1% of discount.
Base Discount = (Firm WLR – Industry WLR) / (Industry WLR)
If your WLR is worse than the industry you could receive a surcharge. For every 1.5% worse than the industry, you could receive up to 1% of surcharge.
Base Surcharge = (Firm WLR – Industry WLR) / (Industry WLR)
Your base discount/surcharge is then adjusted by the eligibility factor and participation factor.
Eligibility Factor: Provides opportunity for new employers with only one year of experience to receive a discount/surcharge. This factor is based on the number of consecutive years an employer has premiums in the evaluation window.
1 Year Of Premiums = 33% Eligibility Factor
2 Years Of Premiums = 67% Eligibility Factor
3 Years Of Premiums = 100% Eligibility Factor
Participation Factor: Accounts for the size of the business. The participation factor is based on base premiums in the three year evaluation window. The higher the premiums, the more fully an employer participates in the program. Every employer starts with a base participation factor of 41.5% and increases 1% for every $1,500 in additional base premiums over $21,000.
For example: If you have $45,000 in base premiums your participation factor is 41.5% + 16% = 57.5%.
Experience Rating Discount/Surcharge Calculation
**To be eligible for a discount or surcharge in the Advanced Program, employers must have premiums in the most recent year of the evaluation window. Employers who do not meet this criteria will pay the industry premium rate.
Calculating your firm’s Net Premium Rate under the Advanced Program
Example of a Discount
Example of a Surcharge