NCCI’s 2007 Hazard Group Mapping

Excess loss factors, which are ratios of expected losses excess of a limit to total expected losses, are used by the National Council on Compensation Insurance (NCCI) in class ratemaking (estimating the expected ratio of losses to payroll for individual workers compensation classifications) and are used by insurance carriers to determine premiums for certain retrospectively rated policies (on policies for which claims used in the premium determination are subject to a per-claim limitation). Collections of workers compensation classifications that use the same expected excess loss factors are called hazard groups. At the beginning of 2007, NCCI implemented a new seven-hazard-group system, replacing the previous four-hazard-group system. This paper describes the analysis that led to the assignment of classes to the new seven hazard groups.