Here are three criteria which Stonetrust uses to determine premium:
The first element considered is the payroll. If you are unsure what payroll to report, see the "Reporting Payroll" section. Payroll amounts determine the compensation an insurer may have to pay in the event of a claim. The second element is the business classification assigned to you by NCCI, the National Council on Compensation Insurance. Your classification will determine the rate you pay; rates vary according to classifications as some classifications are riskier than others. The total payroll for each classification is multiplied by the rate for that classification (rate per $100 payroll) to determine the estimated premium.
The last element used to calculate premium is the experience modifier. Your experience modifier is a reflection of your company's individual loss experience compared to the experience of all other companies with similar operations. If your modifier is higher than the median, you will pay more in premiums; if it is lower, you will pay less. For more information on experience modifiers, see the “Experience Modifiers” section below.
While these three elements are fundamental to determining premiums, other factors can be used as well. Stonetrust may apply discounts to policy premiums if acceptable terms are satisfied.
An experience modifier is a reflection of your company's individual loss experience compared to the experience of all other companies in your state with similar operations. The National Council on Compensation Insurance (NCCI) compiles payroll and loss information on all policyholders and establishes criteria for the "average risk" for each classification code. Your individual modifier reflects a comparison of your company to the "average risk" in your state. An experience modifier uses past experience for a class of business to predict future losses. Based on your company's payroll by classification and factors developed by NCCI, we are able to determine what is known as "expected losses". If your company's losses exceed the "expected losses", your modifier will be greater than the 1.00 median. If your company's losses are less than the "expected losses", your modifier will be less than the 1.00 median, resulting in a credit to your premium.
Your company must have been in business and carried workers' compensation insurance for at least 2 full years before consideration is given. Once you meet the time requirement, you must meet certain premium eligibility requirements as determined by NCCI. In determining the eligible premium, it is important to note that the premium used is the "manual premium", or premium based on your base rates per class code, exclusive of any credits, discounts or prior debit modifiers. The state eligibility requirements are as follows:
The experience modifier is computed using payroll and loss data for 3 consecutive years, excluding the most recent year. Once all of the applicable data is obtained, it is entered into a complex formula to obtain the experience modifier.
Losses used are "incurred" losses. This means that both paid and reserve amounts are shown. Losses used are evaluated on a time scale established by NCCI, with the first evaluation being 18 months after the inception of the policy and subsequent evaluations in 12-month increments thereafter. Data is sent to NCCI annually to update individual records.
The frequency of small claims adversely affects your modifier more than a single large claim because "primary losses" are more heavily weighted than "excess losses" in the rating formula. The single large claim will have a "primary loss" of only $16,000 while the combined "primary loss" of several small claims may far exceed $16,000. Remember that each year of experience will be reflected in 3 consecutive years of experience rating, which means that a single year with numerous small claims will have an adverse affect on your modifier for 3 years. A modifier in excess of 1.00 means you will be paying more than the "manual premium" for your insurance. A modifier less than 1.00 means you will receive a discount on your manual premium in addition to any other offered by your insurer.