Individual Risk Pricing Dick Root – Underwriting Specialist

1. Individual Risk Pricing Dick Root – Underwriting Specialist

2. Individual Risk Pricing • Further refines account pricing to individual risk characteristics • Determines prospective pricing • Provides incentives to improve or maintain good safety practices to reduce costs

3. Individual Risk Pricing Plans • Experience Rating • Construction Credit • Medical Deductibles • Scheduled Rating • Volume Discount

4. Experience Rating • Provides credit or debit based on loss experience over the last three years. • Applied to accounts with average premium over $5,000 in last three years. • Plan rules are adopted from NCCI and used by all companies in Montana • Payroll and losses are reported to NCCI

5. Experience Rating PlanParameters • Limits loss to 30% for medical only claims • Limits maximum claim to $113,000 • Limits maximum debit based on size of risk • Plan does not include experience for the most recently completed year • Experience follows the risk due to ownership change

6. Construction Credit • Plan applies to 85 class codes in the construction industry • Credit based on hourly wage paid over a 40 hour work week • Hourly wage under 13.79 is zero credit • Hourly wage $17.00-$19.00 is 6% credit

7. Medical Deductible • Credit applied for a deductible amount selected by policyholder each year • Deductible amounts can be for medical only

8. Scheduled Rating • Provides credits or debits based on risk characteristics other than experience mod. • New Ownership • Change in operations, equipment or location • Positive or negative safety practices • Early return to work programs • Timely reporting of claims • Loss Rating model to reflect most current loss trend not recognized in experience rating

9. State Agency Pricing • Aggregate price for State Agencies increased 34% effective 7/1/2003. • State Agencies Loss Experience • State Agencies Rate History • State Agency Final Pricing

10. State Agencies Combined Ratio

11. State Agencies $$$ Losses

12. State Agency Manual Rates(Wtd Avg.)

13. State Agency Final Pricing • State Agencies have their own class codes-manual rates are determined from their own loss experience • State Agency manual rates include recent court case and benefit level changes (+4.8%) • Each Agency has their own experience modification • Pricing for each agency is the same methodology as all other Montana State Fund policyholders.

14. Committee Questions