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Insolvent Insurers and Experience Rating

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Insolvent Insurers and Experience Rating

May 14, 2014

Experience modifications that are calculated by the WCIRB rely on unit statistical data reported to the WCIRB by the insurer or insurers that wrote the workers' compensation policies during the experience period. When an insurer becomes insolvent, some or all of the insurer's data may not be used in the calculation of experience modifications.

The use of insolvent insurer data for experience rating purposes is addressed in the California Workers' Compensation Experience Rating Plan—1995 at Section III, Rule 3, subrule f. This rule provides that the experience (payroll and losses) developed under a policy written by an insolvent insurer with a required month of valuation on or after the insurer's date of liquidation will not be used in experience rating unless the experience was previously used in a rating and revaluation is not required to be filed pursuant to Part 4, Section VI, Rule 1 of the California Workers' Compensation Uniform Statistical Reporting Plan—1995. If the experience is excluded, neither the payroll nor the loss data from the policy issued by the insolvent insurer is used in the risk's experience modification. A notation is included on the risk's Experience Rating Form indicating that data is missing due to an insolvent insurer.

Example

A risk's 2011 policy was written by an insolvent insurer and an Order of Liquidation was issued for the insurer on January 1, 2013. This risk has an anniversary rating date of September 1, 2013. The risk's 2013 experience modification includes the following policies that incept within the experience period of December 1, 2008 to
December 1, 2011:

9/1/2011 to 9/1/2012 (insolvent insurer policy) 

9/1/2010 to 9/1/2011 

9/1/2009 to 9/1/2010 

The valuation date for the first, second and third level unit statistical reports for the polices listed above would be 18 months, 30 months and 42 months, respectively, after the policy inception month. The valuation month for these three unit statistical reports would be March 2013. Since the 2011 insolvent insurer policy would be valued in March 2013, which is after the January 1, 2013 Date of Liquidation, the September 1, 2013 experience modification will be calculated excluding the data from the 2011 policy issued by the insolvent insurer.

To learn more, see California's Experience Rating System: Unit Statistical Reports.  

Frequently Asked Questions

Question: For my September 5, 2010 policy, only one of a total of four claims was still open as of March 2012, the date the loss data was first valued. I received a notification from my insurance company that the claim was closed in December 2012, one month before the insurer was declared insolvent. If I provide this notification to the WCIRB, can the experience developed by this 2010 policy be used in my experience modification?

Answer: Since the one claim was still open as of the date of the last valuation (March 2012), the insurer must value this claim again in March 2013 and report the unit statistical data to the WCIRB in May 2013. The California Workers' Compensation Experience Rating Plan—1995 directs that since the valuation of this one claim, which is scheduled to occur in March 2013, is after the date of the insurer's date of liquidation, neither the payroll nor loss information from this policy can be used in your future experience modifications.

Question: In February 2013, we were finally able to get the Workers' Compensation Appeals Board to rule that one of the claims for our 2009 policy year was noncompensable. Since my insurer is now insolvent, how do I get this claim reported as a noncompensable claim?

Answer: It is the insurer's responsibility to report noncompensable claims to the WCIRB. If this is not happening, you can file a written appeal with the insurer and if the insurer is unable or does not respond due to their insolvent status, you can file an appeal to the Insurance Commissioner. In addition, the WCIRB maintains an Ombudsman that can help employers navigate the appeals process. It should be noted that the WCIRB is unable to revise experience modifications based upon claims information and values sent directly by a policyholder or their agent.

Related Information

California Workers' Compensation Experience Rating Plan—1995
California Workers' Compensation Uniform Statistical Reporting Plan—1995
Online Guide to Workers' Comp: California's Experience Rating System
Manuals and Plans

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