When an employer reports claims it causes their premiums to go up because the experience mod increases. The mod is determined by the mix of claim types. If there is less weight on the med-only then those claims have less influence on the mod so the premium will go up less when they're reported. This means the employer may decide to report more of them because the increase in premium is smaller than before and now they can have the insurer handle the claim instead of having to deal with it themselves.
Remember the NCCI experience plan is a split-loss plan so responds to frequency as well as severity. Assuming the expected loss used in rating is accurate and we're just dealing with an underreporting of med claims, the ballast (B), weight (W) and expected primary and excess losses (E_p, E_e) won't change. This means if we experience any additional reporting of med-only losses, A_p will increase and so the mod always increases in this situation.
so do you mean that employers will ALWAYS tend to report more when the weight on certain type of claim is reduced regardless of the severity (med-only or non-med claims), and vice versa?
I am just simply wondering if the question asks the impact on safety incentive when the weight on med-only loss is increased.
Employers and people are sensitive to price changes. If you're going to receive less of a price increase for reporting a loss then you're more likely to report it and let the insurer handle the claim for you. Any time your premiums go up, you're more likely to take actions to avoid it happening again. In the case of workers' compensation this usually means the employer makes safety improvements.
With workers' compensation, insurers often offer risk control services to help the insured reduce their claims. So any action which encourages more loss reporting means the insurer's risk control services have more information and can recommend better safety incentives.
Comments
When an employer reports claims it causes their premiums to go up because the experience mod increases. The mod is determined by the mix of claim types. If there is less weight on the med-only then those claims have less influence on the mod so the premium will go up less when they're reported. This means the employer may decide to report more of them because the increase in premium is smaller than before and now they can have the insurer handle the claim instead of having to deal with it themselves.
Will the size of the med-only losses (which are small) make a difference?
if the weight on med-only loss is increased, will the employers also report more because reporting more smaller losses can lower the mod?
Remember the NCCI experience plan is a split-loss plan so responds to frequency as well as severity. Assuming the expected loss used in rating is accurate and we're just dealing with an underreporting of med claims, the ballast (B), weight (W) and expected primary and excess losses (E_p, E_e) won't change. This means if we experience any additional reporting of med-only losses, A_p will increase and so the mod always increases in this situation.
so do you mean that employers will ALWAYS tend to report more when the weight on certain type of claim is reduced regardless of the severity (med-only or non-med claims), and vice versa?
I am just simply wondering if the question asks the impact on safety incentive when the weight on med-only loss is increased.
Employers and people are sensitive to price changes. If you're going to receive less of a price increase for reporting a loss then you're more likely to report it and let the insurer handle the claim for you. Any time your premiums go up, you're more likely to take actions to avoid it happening again. In the case of workers' compensation this usually means the employer makes safety improvements.
With workers' compensation, insurers often offer risk control services to help the insured reduce their claims. So any action which encourages more loss reporting means the insurer's risk control services have more information and can recommend better safety incentives.