Experience rating modifications have maximum limits based on a formula.
The Graduated Experience Rating Tables became effective 1/1/96 and allows for gradual maximums (caps) on debit modifications. The cap formula had been as follows until 1/1/16:CAP = 1 + 0.00005(E + 2E/G) Effective 1/1/16 the formula was changed to:CAP = 1.10 + 0.0004(E/G) Where E = expected losses andG = State Per Claim Accident limitation divided by 25,000 rounded to the nearest 0.05. For the following years G is equal to:
|Effective Date||Accident Limit||Limit/ 25,000||G Value (Rounded)|
For interstate rated risk, use the state per claim accident limit for the state with the most expected losses. Because an interstate risk is usually large, the cap formula may not have an effect. This max or cap formula is shown as a footnote as “Cap on Modifications” in the Experience Rating Plan Manual, Part Five, Rates, at the end of the rate pages below the Table of Ballast Values chart. To calculate a maximum mod, simply determine the expected losses for a risk and input that number into the attached spreadsheet.