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Underwriting Terminology for the Claims Examiner

Saturday, October 26, 2002 | 953 | 0 | min read

The professional claims examiner not only must know workers' compensation terminology and acronyms, but should also have an understanding of what gets the claim to the desk in the first place: the insurance policy that is the binding contract between the employer and the insurance company. This is called underwriting, and this process has its own set of terms and acronyms. The following is a review of common underwriting terms.

Policy The contractual agreement between an insurance carrier or TPA and an employer. This language is standardized, and may be referred to as "boiler plate" language.


The specific terms of a particular policy, outlining the payroll, type of employees covered by the policy, the premium projected, and the period of coverage.


An addendum attached to the standard policy to customize special coverage needs for the employer.


A work related injury for which the carrier must pay out benefits.

Class Code

A premium-rating factor weighting job types by arduousness and risk of injury. Class codes are used to classify premium, and employers must report payroll by class.


A state-mandated formula used to calculate insurance premium rates based on a three-year historical comparison of an individual employer to a pool of all similar employers. The formula is calculated by employee dollars of payroll per class code, plus a weighting for the employer's frequency and severity of loss experience compared to similar employers.

Open Rating

Historically, minimum premium rates were set by the State of California's Workers' Compensation Insurance Rating Bureau, and all companies had to have the rates they charged approved by the WCIRB. Effective 1/1/95, each insurer began rating based on their own database instead of using the states database. Although the WCIRB must still approve the insurer's rates, there is no longer a minimum rate threshold.


The number of claims that an employer has compared to other employers in the same type of business.


The dollars reserved on a case based on the seriousness of the injury and the benefits that the Claim department anticipates will be paid.

Experience Modification

The weighting in the premium rating formula relating to frequency and severity of losses. The employer's historical losses are compared to the standard losses for all similar employers when evaluating whether to insure an account. The X-mod has a large impact on the cost of an employer's insurance policy. This type of rating procedure "utilizes insurance experience of the individual policyholder to forecast future losses by measuring the policyholder's loss experience against" that of other "policyholders in the same classification to produce a prospective premium credit, debit or unity modification." The WCIRB establishes the "ex mod" based on the actual frequency and severity of the employer's past claims. The established premium rate for an employer is unaffected by an ex-mod of 100. A variance above or below 100 will result in an adjustment of the employer's established premium that is proportionate to the extent of the variance. As an example, an employer who has an ex-mod of 156 will pay 156% of its established base premium rate and will owe an assessment. On the other hand, an employer with a good "ex-mod" of 86% will mean that the employer pays only 86% of its established premium rate.

The next article will continue with some terminology definitions, as well as a quick review of some classes of employees who typically are, or are not, covered under a work comp policy despite what you might first think.

Author, Cyndi Koppany, is Director of Corporate Training for Cambridge Integrated Services Group, Inc. E-mail her at ckoppany@earthlink.net.


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