The Missouri Department of Insurance has directed the National Council on Compensation Insurance (NCCI) to revise loss costs for years 2003-2005.
According to the statement issued by the Department, historical payrolls used to establish some advisory loss costs were understated for that time period. Payroll amounts are one factor used to determine loss costs for any given year. Loss costs are then used to determine workers compensation insurance rates for employers who carry this type of coverage. If understated payroll amounts are used when calculating loss costs, higher loss costs result. This, in turn, incorrectly drives rates for workers compensation insurance higher.
Once the understated payroll problem was identified and corrected, the NCCI recalculated the advisory loss costs for the affected years. The NCCI will be identifying the insurers and policyholders affected by the inaccurate advisory loss cost calculations within the next few months. Full refunds must be provided to any affected policyholder who is owed $10 or more per policy for the affected classification codes.
This reconciliation will not affect all policyholders. Only a limited number of classification codes were affected by the understatement of payroll. Not all insurance companies use NCCI advisory loss costs in the development of their workers compensation rates. Affected policyholders will be contacted by their insurer. Policyholders should wait for notification before calling anyone. The department estimates that this matter will be resolved before the end of 2006. Those policyholders affected by this reconciliation should be contacted and refunds issued by then.
Policyholders with questions should contact their insurance agent or insurance company.
Source: Missouri Department of Insurance
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