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ARAP - Assigned Risk Adjustment Program

A Workers Compensation Term Defined, Described, Explained

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ARAP - Assigned Risk Adjustment Program...

An adjustment applied to those employers who are subject to the experience modification factor. It is used in some states to adjust premium for Assigned Risk (pool) policies. Although NCCI includes this adjustment on all their experience mod worksheets not all states use the ARAP. The Assigned Risk Adjustment Program is designed to penalize those employers who show continuous poor loss experience. The ARAP program was designed to provide a money related incentive for employers to improve their loss experience. The message it sends is "improve your losses or pay more!"

Here's some key points about the ARAP:
  • This factor applies only to employers who find their workers compensation is placed in the assigned risk market;
  • When recognized and implemented by an employer effective loss control and safety engineering may over time reduce the effect of ARAP factor;
  • It is calculated using the same experience that is used in the experience modification calculation however rather than placing the emphasis on the primary losses it takes into consideration the total loss experience;
  • ARAP specifically targets experience-rated employers with poor loss records to share more equitably in the underwriting losses of the residual market.
  • The ARAP factor can be high. This means that on top of the higher rates an employer suffers when placed in the assigned risk market or pool, they may, in addition to the application of their experience mod factor, emod, the additional ARAP factor will be applied. This could cause significant additional costs to an employer.
  • The ARAP factor maximum is controlled by each individual state however the average is 49%.


The Assigned Risk Adjustment Program places more emphasis on the total losses an employer sustains as opposed to the experience modification factor which places more emphasis on the frequency of losses rather than the severity. When working in conjunction with the emod, the ARAP provides an efficient method of increasing premium and placing greater responsibility on those employers who fail to control their workers comp losses. Does the ARAP promote safety in the workplace? No, but it sure makes the employer suffer the consequences for lack of control!




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