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D Ratio

A Workers Compensation Term Defined, Described and Explained

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D Ratio

It is a ratio used to calculate a workers compensation experience rating factor. It is a ratio of the primary expected losses plus a discounted value of large losses divided by the total expected losses.

Where can you find the d ratio in use? It is found on a workers compensation experience modification factor (emod) worksheet and is a factor used in the calculation of the emod. The d ratio is used to calculate the expected primary losses for any certain classification code. In its use the d ratio is multiplied by the expected losses for a certain class code and the resulting number is the expected primary losses for that specific class code. D ratios are produced by a rating bureau and published in that rating bureaus experience rating plan manual. In regards NCCI the published d ratio for any given class code can be found in table II of the experience rating manual.

Also known as the discount ratio, the d ratio is produced during the workers compensation rate making phase by the specific rate making bureau in question. Each workers comp class code is assigned its own d ratio as part of the rate making process.

Recent changes (2009-2010) in NCCI class rate making methods will affect the d ratio and its application for individual experience mod factors. The new method being employed by NCCI will make adjustments, in a simple form, based on hazard groups. With more viable information available, the d ratios now being used should better reflect the likely outcome of loss thus making the predictive nature of the d ratio more precise. However the exact nature of these changes on the d ratio will only tell in the future.

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