Split rating periods in workers’ compensation
In workers’ compensation, you can use split rating periods to create separate rating periods for dates selected by the user. You can create rating periods for each jurisdiction around one or more split dates.
Split rating periods are used to provide rating accuracy or to capture important information. In both cases, premiums are calculated separately for each period.
- Rating accuracy – Workers’ compensation is a basis-rated line of business. If rating changes in the middle of a term, the basis is split to insure the accuracy of the rating. The basis amounts must be reported separately for each period. For example, this can occur when an experience modifier is revised.
- Capture information – Splits are used to determine the total premium before and after a major event of the insured. For example, an employer wants to split the premiums on the date of a bankruptcy or on the effective date that the company is sold a subsidiary. Even if not legally required, these splits may be important to the insurer or to the employer for tracking purposes.
Split for experience modifier corrections
When Unit Statistical Reports are corrected by the state rating authority, such as NCCI, for prior policy terms the correction may trigger a recalculation of the employer’s experience modifier. You can use Late Modifier for this type of split. If the recalculation determines that the value of the experience modifier is lower, from 1.03 to .99 for example, the correction is reported to the current insurer as effective on the policy effective date. In this case, splitting the rating period is not required. If however the recalculation determines that the value of the experience modifier is higher, from .99 to 1.03 for example, the new corrected experience modifier is effective on the recalculation date, not the policy effective date. Since rating the policy requires including two different modifications, a split in basis is required on the effective date of the newer modifier.
Split for mandatory rate changes
Sometimes a jurisdiction issues a new set of rates amending the rates to be used within in-force policies. Since these new rates are effective for in-force periods, a rating period split is required to calculate the premium. You can use Forced Rerating for this type of split. A jurisdiction may issue these sudden and mandatory changes for various reasons, such as new legislation which significantly impacts the incurred amounts for claims.
Split for other rating reasons
You can use split rating periods for other types of midterm changes that affect basis-rated premium. For example, if the insurer allows midterm changes in employer liability limits, you can use a split rating period to apply the correct increase limits modifier to each period. You can create a reason code for this.
Split for informational reasons
In PolicyCenter, you can split rating periods for informational reasons. You can create a reason code for this.
Split for anniversary rating date
The Anniversary Rating Date is a date within 12 months prior to the policy effective date. If you enter an anniversary that is not the policy effective date, PolicyCenter splits rating into two periods around the anniversary rating date.
The anniversary rating date is set on the jurisdiction. When an anniversary rating date designates that the policy must be split, PolicyCenter splits the rating period that contains that date into two around the anniversary rating date. For each rating period, PolicyCenter displays editable fields for covered employee information and modifiers which are specified as Split Rating Period in Product Designer.