Primary and Excess Loss Formula
For 2013
For each claim, the actual primary loss is the first dollar portion of the claim costs. The actual primary loss has been shown in actuarial studies to have the greater credibility in predicting future experience. The actual excess loss is the remaining portion of the claim costs. The actual excess loss has been shown in actuarial studies to have less credibility in predicting future experience. Both of these amounts are summed over all claims.
For each claim less than $20,112, the full value of the claim shall be considered the actual primary loss and the actual excess loss shall be $0.
For each claim more than $20,112 but less than or equal to $266,241 the actual primary loss and actual excess loss shall be determined from the formulas:
- Actual primary loss = (50,280 × total loss) ÷ (total loss + 30,168).
- Actual excess loss = total loss − actual primary loss.
- Actual primary loss = $45,163
and - Actual excess loss = $221,078
For each claim the maximum amount charged for the combined primary and excess portion of the losses will be $266,241.
Medical only deduction
For any claim without disability benefits (such as time-loss, partial permanent disability, total permanent disability or death) either actually paid or estimated to be paid, the total actual losses for calculating the primary loss and excess loss shall first be reduced by the lesser of $2,460 or the total cost of the claim.
| Examples of total, primary and excess loss | ||||
|---|---|---|---|---|
| Total loss | Type of claim | Total loss (after deduction) |
Primary loss | Excess loss |
| 200 | Medical only | 0 | 0 | 0 |
| 2,500 | Medical only | 40 | 40 | 0 |
| 2,500 | Timeloss | 2,500 | 2,500 | 0 |
| 25,000 | Medical only | 22,540 | 21,502 | 1,038 |
| 25,000 | Timeloss | 25,000 | 22,785 | 2,215 |
| 100,000 | PPD | 100,000 | 38,627 | 61,373 |
| 2,000,000 | TPD pension | 266,241 | 45,163 | 221,078 |
Note: The deduction, $2,460, is twice the average case incurred cost of these types of claims that occur during the three-year period used for experience rating. On average this results in reducing the average actual loss about seventy percent for these types of claims adjusted. This is done to help make the transition between the two different experience rating methods better by helping make the change in experience factor reasonable for small changes to the actual losses.
