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NCRB To Eliminate Aggravated Inequity Rule

26 Apr, 2010 WorkersCompensation.com

                               
Raleigh, NC (CompNewsNetwork) - The North Carolina Rate Bureau has filed and the North Carolina Commissioner of Insurance has approved the elimination of the Aggravated Inequity Rule in North Carolina effective May 1, 2010. This change is effective immediately and, therefore, unit statistical reports reflecting Aggravated Inequity claims will no longer be accepted on or after May 1, 2010.
 
For a number of years, the Aggravated Inequity Rule has allowed interested parties to contact the North Carolina Rate Bureau or the member companies if circumstances have occurred that resulted in a standard premium change of 5% or more when the calculation of an experience modification, based on reserves at the normal valuation date, is compared with the cost of claims closed between such normal valuation date and the next effective date. Over the last several years, it has become increasingly difficult for this rule to be appropriately administered due to a number of factors not limited to:
 
Carriers often issue their policies several months in advance. In order to appropriately determine
whether the premium reduction is 5% or more, the premium would have to be evaluated both
before and after the mod was calculated. This would be appropriate in the case where the policy
was issued with the incorrect mod initially; however, in most instances the North Carolina Rate
Bureau issues experience modifications 90 days or more prior to the effective date of the policy.
 
Employers often change insurance carriers. If the employer changes insurance carriers from one
year to the next, the new carrier has no way of determining whether the old carrier's submission of
corrected data has resulted in a 5% reduction.

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