NCCI Ratemaking Starts with the Data


Spring is an exciting time of year for data analysts and actuaries at the National Council on Compensation Insurance (NCCI). The annual April 1 reporting deadline for Financial Calls marks the beginning of a new ratemaking cycle. Affiliated insurance providers submit this aggregated data to NCCI, and NCCI analyzes it to make rate and loss cost recommendations for 37 states and the District of Columbia. NCCI communicates the recommendations through its annual experience filings made to state insurance regulators. Sometimes industry stakeholders have questions about the underlying data that goes into these filings, as well as the typical timeline—so we will explore them here.

What data does NCCI use to determine the yearly recommended change in loss cost and rate levels?

NCCI relies on Financial Call data, which includes premiums, losses, claim counts, and expenses reported on an aggregated basis by state and by year. NCCI collects both policy year and calendar-accident year data in these Financial Calls. For both types, data providers report the values as of December 31, so they include the same transactions, allocated differently. See the table here for a summary of the differences between the two data types.

How does the timing of the annual loss cost and rate filings relate to the reporting of the Financial Call data?

The most common effective date for NCCI rate and loss cost filings is January 1, so for example, let’s take rates and loss costs that will be effective beginning January 2019:

  • Data will be valued as of Year-End 2017, meaning that premium earned, and claims experience incurred, during Calendar Year 2017 will be included. Put another way, a period of one year separates the valuation of data and the effective date of the filing.
  • The data relied upon to determine appropriate average loss cost levels will include policies that have expired through Year-End 2017.
  • Data from policies that are still in effect as of Year-End 2017 (expiring in 2018) may also be considered in the determination of trend.

There are many state-specific factors that determine when NCCI submits annual filings to state insurance regulators—and the effective dates of those filings. These include statutory requirements, rules of the governing authority, notification requirements, review processes, and hearing schedules. NCCI works with state insurance regulators to meet these legal requirements, while also working to allow the industry ample time to implement any possible changes.

Could NCCI rely more heavily on the most recent data?

It may be tempting to use the most recent year as a sign of things to come, but doing so could result in large swings from one year’s filing to the next. This is because a single year’s results may reflect fluctuations in the data—conditions that are unlikely to repeat. Just as an investor wouldn’t want to base investment decisions on the latest movement in a single stock price, one wouldn’t want to place too much leverage on immature and incomplete data. This is the same rationale for using multiple years of experience in the calculation of experience rating mods—the latest year doesn’t always tell the whole story.

Placing more emphasis on the latest year of data also introduces another source of uncertainty. Insurers may not know the final premium and benefit payments for a workers compensation policy until long after its expiration. When a policy has not yet expired (as with Policy Year 2017 valued as of Year-End 2017), there’s a high level of uncertainty surrounding the unexpired exposure. As insurers audit policies and close claims, the data is closer to reflecting the final values. Therefore, the level of uncertainty is higher in more recent years.

What’s Next?

After workers comp insurers submit Financial Calls to NCCI by April 1, our data analysts and actuaries validate and analyze this data, which serves as the basis for rate and loss cost filings. A lead actuary for each state makes determinations—including the data used—in developing a rate or loss cost recommendation that is not excessive, inadequate, or unfairly discriminatory. These determinations sometimes involve balancing responsiveness to the latest market conditions with stabilityin the rate or loss cost environment.

Hopefully this article has provided valuable insight about the data behind NCCI’s ratemaking. For more information about the ratemaking process and timelines, please visit NCCI’s Learning Center and view our Webinar on Demand, NCCI Ratemaking: How Fresh Is the Data?.


Kirt Dooley is a Practice Leader & Senior Actuary at NCCI. He joined the company in 2004 and has worked in a variety of areas including ratemaking, legislative analysis, and research of actuarial methods. He also has prepared and provided expert testimony in support of NCCI rate filings in several states. Currently, Dooley oversees the Analytics and Data Quality practice area within the Actuarial & Economic Services Division.

This article is provided solely as a reference tool to be used for informational purposes only. The information in this article shall not be construed or interpreted as providing legal or any other advice. Use of this article for any purpose other than as set forth herein is strictly prohibited.


1 Development factors adjust reported values for past policies to their estimated ultimate value (i.e., final premium and benefit payments). Trend factors forecast how much loss experience for future policies will differ from the past.

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