806 KAR 13:130. Experience modification factors for
workers' compensation insurers.
RELATES TO: KRS 304.13-011(9), 304.13-057,
STATUTORY AUTHORITY: KRS 304.13-415
NECESSITY, FUNCTION, AND CONFORMITY: KRS 304.2-110
provides that the Executive Director of Insurance may make reasonable administrative
regulations necessary for or as an aid to the effectuation of any provision of
the Kentucky Insurance Code. KRS 304.13-415 requires that for each workers'
compensation policy issued or renewed on or after May 1, 1997, insurers or
licensed advisory organizations shall provide policyholders with written
explanations of the policyholders' experience modification factor and the data
and methodology utilized in the calculation of the factor. KRS 304.13-415 also
provides that the executive director shall establish guidelines for application of experience
modification factors to be used in developing workers' compensation insurance
rates. This administrative regulation establishes guidelines for the
application of experience modification factors, and for the written explanations
to policyholders regarding how the factors were calculated.
Section 1. Workers' compensation insurers that use
experience modification factors shall develop an experience modification factor
for each insured in accordance with the following provisions:
(1) The experience modification factor shall be
based upon three (3) full years of experience ending one (1) year prior to the
effective date of the modification;
(2) The experience modification factor shall be
developed on an annual basis and shall remain effective for twelve (12) months;
(3) Only one (1) experience modification shall
apply to a given risk at any time and shall apply to all operations of the
(4) In developing premium for the experience
modification factor, insurers shall:
(a) Apply the experience modification factor to the
carrier's rates in force on the effective date of the experience modification
(b) Base the premium upon state qualifying premium
amounts and the predetermined state limits, as both are identified in an
advisory organization's publications approved by the executive director; and
(5) An experience modification factor may be
determined for a risk if the risk has developed sufficient qualifying premium
based on payroll and other exposures reported in accordance with the
publications of the National Council on Compensation Insurance.
Section 2. Each insurer or advisory organization
using experience modification factors shall provide the policyholder with a
written explanation of the policyholder's experience modification factor in
language reasonably calculated to inform the policyholder of the data and
methodology utilized in the calculation of the factor, including the
information specified in Section 1 of this administrative regulation.
Section 3. Incorporation by Reference. (1)
"Experience Rating Plan Manual for Workers Compensation and Employers
Liability Insurance", The National Council on Compensation Insurance, is
incorporated by reference.
(2) This material may be inspected, copied or
obtained at the Kentucky Office of Insurance, 215 W. Main Street, Frankfort,
Kentucky 40602, Monday through Friday, 8 a.m. to 4:30 p.m. (24 Ky.R. 431; Am.
895; eff. 10-13-97; TAm eff. 8-9-2007.)