The Experience Rating Plan (Plan) allows for the correction of losses that are ruled to be noncompensable subsequent to the first unit statistical report. The Unit Statistical Reporting Guidebook, Part 6 - Correction Unit Reports, advises carriers when to submit loss correction unit reports:
A correction unit report for a Loss Record must be filed for previously submitted unit reports when … the following occurs:
· Noncompensable claims (if any part of the claim is ruled or declared to be noncompensable between the time frame of the 1st unit reporting and one year after the 5th report due date)
Report Due Date: 60 days after the unit statistical valuation date
Unit Statistical Valuation Date: 18 months after policy inception
Experience Ratings Revised
Rule 4.B.2.a., requires "Submission of revised unit reports according to the Statistical Plan will result in the automatic recalculation of the current and up to two preceding experience rating modifications." The "current" policy would be that in effect on the date of the ruling of noncompensability. Depending on the length of time between the date of loss and the ruling of noncompensability, none, one, two or three experience ratings may be impacted.
Policy Effective Date: 02/01/2019 to 02/01/2020
Date of Loss: 01/15/2020
First report due: 10/01/2020
2nd report due: 10/01/2021
3rd report due: 10/01/2022
4th report due: 10/01/2023
5th report due: 10/01/2024
One year after 5th report: 10/01/2025
So, the claim that occurred during the 2/1/2019 to 2/1/2020 must be declared noncompensable by 10/1/2025 for the declaration to have any impact on an experience modification.
The policy term 2/1/2019 to 2/1/2020 will be included in the experience rating calculations for the years 2021, 2022 and 2023. (Remember the experience period is the three years prior, not including the most recent year.)
So if the declaration of noncompensability had been made during the 2022 policy term, two experience ratings would be impacted, those for the 2/1/2022 policy and the 2/1/2021 policy. If the declaration were not made until, say 1/1/2023 only the 2023 experience modification would be impacted.
Excerpt from NCCI Circular DR-2012-01, August 21, 2012:
Unit statistical data is reported in accordance with the Statistical Plan. Item U-1398 removes the requirement to reduce loss amounts to zero dollars. For claims that are determined to be noncompensable or fully fraudulent subsequent to unit reporting, corrections are required to prior report levels to code the claims accordingly (report levels 1–5 only).
NCCI will continue to exclude these claims from the calculation of experience ratings using the following:
· Claims with Loss Condition—Type of Settlement—Noncompensable (Code 05)
· Claims with Fraudulent Claim code—Fully Fraudulent (Code 02)
This process allows insurers to report loss amounts that are reflective in the insurers’ systems without needing to reduce these losses to zero.
Reporting Implementation—policies effective January 1, 2013 and subsequent. The initial unit reports will be valued as of July 2014, and will be due to NCCI by September 2014.