PURPOSE
The decimal extension of ratemaking (loss costs and rates) and experience rating (Expected Loss Rates (ELRs) values) from two decimal places (X.XX) to three decimal places (X.XXX) aims to enhance the precision of these values. With the continued decreases in workers compensation loss costs/rates, the changes for some classification codes are mathematically constrained with two decimal places, and moving to three decimal places will provide more responsiveness.
This proposal enables NCCI to recommend more precise and responsive loss cost, rate, and ELR changes across all classification codes and statistical codes with associated rates beginning in the 2026 rate filing cycle.
BACKGROUND
Over time, the workers compensation (WC) system has witnessed an ongoing rise in the payroll exposure base, coupled with a decline in loss costs and rates. Since the onset of the COVID-19 pandemic, these trends have accelerated, bringing both higher payroll levels and a decline in bureau loss cost/rate levels.
The current practice of filing recommended loss costs, rates, and ELRs rounded to two decimal places poses challenges in some cases in achieving precise percentage changes.
PROPOSAL
In response, NCCI will be proposing to extend the precision of loss costs, rates, and ELRs to three decimal places. This change will be recommended in all jurisdictions where NCCI provides ratemaking services, beginning with filings effective on and after 1/1/2026.
This modification aims to facilitate more precise percentage changes across all classification codes. This proposed change is an effort to modernize and align with the current economic and WC environments, positioning the WC industry for the future.
Extending loss costs, rates, and ELRs to three decimal places is expected to be premium neutral on an industry group and statewide basis.
IMPLEMENTATION
NCCI has announced its plans to enhance the precision of ratemaking and experience rating values through two FYI circulars, FYI-CW-2024-01 and FYI-DR-2024-01, which require authentication to view.
FREQUENTLY ASKED QUESTIONS
For a better understanding of the proposed change to extend NCCI’s loss costs, rates, and Expected Loss Rates (ELRs) to three decimal places, please review the following Frequently Asked Questions (FAQs).
General FAQs
NCCI will be proposing the extension of loss costs, rates, and experience rating ELRs from two decimal places to three decimal places to enhance precision in the ratemaking process beginning with filings effective January 1, 2026, and subsequent.
Within the workers compensation system, ongoing payroll growth coupled with the cumulative reduction of loss costs and rates over a prolonged period of time has reached a level where achieving small, precise percentage changes is becoming more of a challenge in some cases. To resolve this issue, NCCI is proposing to extend loss costs, rates, and ELRs to three decimal places, to provide greater flexibility and precision for achieving appropriate adjustments across all classification codes and statistical codes with associated rates.
NCCI has released an article, Precision at Work: Filing of Three-Decimal Loss Costs, Rates, and Expected Loss Rates, which provides additional information on this upcoming change.
Beginning with filings effective January 1, 2026, and subsequent, NCCI will be proposing loss costs, rates, and ELRs with a precision level of three decimal places. Upon approval, stakeholders should be prepared to receive these values for their respective purposes.
This represents a significant shift to help modernize the workers compensation industry. Although implementing this change may pose challenges, it will yield the advantage of enhanced precision in loss costs and rates to better position the industry for the potential for ongoing payroll growth, coupled with lower loss cost/rate classifications.
In the event of non-approval by any jurisdiction, the precision for these values in that jurisdiction will be maintained at two decimal places or as determined by the applicable regulatory body.
Upon regulatory approval, all classification codes and statistical codes with associated rates will observe the change in precision to three-decimal loss costs, rates, and ELRs.
Extending loss costs, rates, and ELRs to three decimal places is expected to be premium neutral on an industry group and statewide basis.
NCCI will be proposing loss costs, rates, and ELRs with three-decimal-place precision for all classification codes and statistical codes with associated rates across all jurisdictions where NCCI provides ratemaking services. NCCI is anticipating making these changes with annual loss costs/rates and rating values filings effective on and after January 1, 2026.
This change will be recommended in all states where NCCI provides ratemaking services (includes AK, AL, AR, AZ, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MD, ME, MO, MS, MT, NC, NE, NH, NM, NV, OK, OR, RI, SC, SD, TN, TX, UT, VA, VT, and WV).
This change has been discussed with independent bureau (IB) states for their consideration. NCCI is committed to collaborating with the IBs to explore the potential for uniform adoption of this initiative.
Extending loss costs, rates, and ELRs to three decimal places is expected to be premium neutral on an industry group and statewide basis.
After assessing manuals and data reporting impacts and engaging stakeholders through voice of the customer outreach, NCCI has determined that extending rates to three decimal places represents the best approach because it is more readily achievable, less disruptive, and sufficient for solving the immediate challenge. Payroll limiting and modifying the exposure base to Payroll / 1,000 were considered. However, the decimal extension seamlessly reduces mathematical constraints, enabling all classifications to better attain indications within the existing framework.
NCCI is not proposing to change any methodology underlying the calculation of loss costs, rates, or ELRs. These values will be computed using the same methodologies currently used but with an extension of precision to three decimal places. This modification simply reduces the mathematical limitation of rounding to two decimal places.
Accurate and adequate rates are essential for the insurance industry and for insureds. The overall effect of increases in payroll and declines in loss costs/rates is starting to reach the point where achieving small, precise changes can be a challenge in some cases. This change will enable more precise adjustments where appropriate and reduce the disruption to insureds from larger percentage changes caused by rounding loss costs/rates to two decimal places.
NCCI has announced its plan to enhance the precision of ratemaking and experience rating values in FYI circulars, FYI-CW-2024-01 and FYI-DR-2024-01, released on January 11, 2024.
Refer to NCCI’s Filing Guide for Rates and Forms for the filing requirements in your state.
Continue to report the manual rates that have been approved by the regulator. For Unit Statistical and Policy Data reporting, NCCI accepts manual rates up to three decimal places, currently supported using the standard Workers Compensation Insurance Organizations (WCIO) record layouts.
Experience rating modification factors will remain at two decimal places.
The ELRs used in the experience rating modification calculation will be calculated to three decimal places.
Experience rating modification worksheets will display the ELRs as approved by each jurisdiction. When a jurisdiction approves the annual loss costs/rates and rating values filing with three-decimal-place ELRs, the experience rating modification worksheets with rating effective dates on or after the filing effective date will be revised. These revised experience rating modification worksheets will reflect the recently approved rating values including ELRs calculated to three decimal places.
The first filing approval with a three-decimal ELR is possible as early as July 2025 for experience rating modifications effective January 1, 2026, and later.
Carrier distribution of experience rating modification worksheets via Experience Rating Worksheet Distribution (ERWD) with three-decimal-place ELRs requires the Workers Compensation Insurance Organizations (WCIO) WCRATING standard record layout to be updated. NCCI will be proposing changes to WCRATING at an upcoming WCIO Electronic Data Interchange (EDI) meeting. More communication will be provided to carriers ahead of changes to the file format provided via ERWD.
NCCI surveyed a range of carriers to understand timeframe requirements and any challenges related to this change. While many carriers indicated that they could be prepared for an earlier transition, some carriers indicated that they would require or benefit from a longer lead time frame, for example, because of in-flight system transitions. To ensure an orderly transition, we selected an effective date roughly two years from the FYI circulars, FYI-CW-2024-01 and FYI-DR-2024-01, released on January 11, 2024, to allow for all carriers to meet the implementation target.
For data reporting, NCCI will be able to accept manual rates at two or three decimal places. Approved carrier rates will be determined on a state-by-state basis by the regulatory authority.
NCCI plans to include the change to three decimal places as part of each state’s January 1, 2026, and later loss costs/rates and rating values filing. Normal state-by-state approval of filed recommendations can include a variety of approval times by each individual state as they evaluate the filing in its entirety, and we expect that to be the case with these filings as well. We will be communicating with state regulators regularly on this change leading up to the annual loss costs/rates and rating values filings effective on and after January 1, 2026, and will look to answer any questions regulators might have in advance of the filings in the hopes of reducing any potential approval delays.
In the event of non-approval by any jurisdiction, the precision for these values in that jurisdiction will be maintained at two decimal places or as determined by the applicable regulatory body.
Yes. West Virginia and the District of Columbia have historically used a November 1 effective date for experience filings. Both jurisdictions will be changing the anticipated proposed effective date for the upcoming experience filings from November 1, 2024, to January 1, 2025. Therefore, the decimal extension will be proposed in West Virginia and the District of Columbia to be effective on January 1, 2026.
NCCI has announced these effective date changes in FYI Circulars FYI-WV-2024-01 and FYI-DC-2024-01, released on March 29, 2024.
All loss costs, rates, and experience rating Expected Loss Rates (ELRs) shown on the Rates or Loss Costs and Rating Values will be extended from two to three decimal places. The handling of each of the miscellaneous values and charges is outlined below:
- Catastrophe Provisions for Catastrophe (Other Than Certified Acts of Terrorism)—Statistical Code 9741. The value will extend to three decimal places and include a trailing zero.
- Catastrophe Provisions for Terrorism—Statistical Code 9740. The value will extend to three decimal places with a trailing zero unless the value is currently filed as three decimal places.
- Disease Experience in Connection With Classification Code 1005 (Coal Mining Risks) (State and Federal Benefits)—Statistical Code 0156. The separate non-ratable disease element factors for state and federal benefits associated with surface coal mining will extend to three decimal places.
- Disease Experience in Connection With Classification Code 1016 (Coal Mining Risks) (State and Federal Benefits)—Statistical Code 0158. The separate non-ratable disease element factors for state and federal benefits will extend to three decimal places.
- Disease Experience in Connection With Non-Coal Mine Classification Code (or Disease Experience for Federal Benefits Only)—Statistical Code 0164. The non-ratable disease element factors for state and federal benefits will extend to three decimal places.
- Experience of Insureds Exposed to Coal Workers’ Pneumoconiosis With Substantial Underground Coal Mine Experience—Statistical Code 0161. The Virginia non-ratable disease charge will extend to three decimal places.
- Experience of All Other Insureds Exposed to Coal Workers’ Pneumoconiosis—Statistical Code 0162. The Virginia non-ratable disease charge will extend to three decimal places.
- Non-ratable Element Codes (part of ratable/non-ratable groups)—All non-ratable portions of advisory loss costs, voluntary rates, and assigned risk rates will extend to three decimals. Refer to Part 6 in NCCI’s Statistical Plan for a listing of statistical codes assigned to the non-ratable element.
- Virginia Tuberculosis Charge—The additional Virginia charge associated with Classification Code 8833—Hospital—Professional Employees and Classification Code 9040—Hospital—All Other Employees for the treatment of tuberculosis will extend to three decimal places.
The United States Longshore and Harbor Workers’ Compensation Coverage Percentage for non-F-classification codes will not be extended to three decimal places. Additionally, upset payroll values will not be extended to three decimal places.
Note that supplementary disease loads assigned to Statistical Codes 0059, 0065, 0066, and 0067 are not listed above because NCCI is no longer producing supplementary disease loss costs or rates. Carriers can still choose to calculate their own factors and include a load for supplemental occupational disease exposure, which can be two or three decimal places.
Yes, the Basic Manual was recently updated for a Virginia exception. NCCI’s Basic Manual for Virginia rule, Advisory loss cost, authorized rate, and manual rate for voluntary policies previously stated that all rates must be extended to two decimal places when calculating premium. The rule was revised to allow for three-decimal loss costs and rates in Item 01-VA-2024—Revisions to Basic Manual Rules Related to the Rounding of Rates Used in Premium Calculations in Virginia. This item becomes effective for new and renewal policies with effective dates on and after April 1, 2026.
For information related to Item 01-VA-2024, refer to:
- Announcement Circular VA-2024-02
- Approval Circular VA-2024-03
NCCI does not provide guidance related to the rounding of carrier calculations.
Virginia is the only NCCI state that provides rules for the rounding of rates; these rules are included in NCCI’s Basic Manual for Virginia rule, Advisory loss cost, authorized rate, and manual rate for voluntary policies.
Data Reporting FAQs
For Unit Statistical Data, Policy Data, and Financial Call reporting, final premium will continue to be reported to the nearest whole dollar. The Decimal Extension Project seeks to enhance the precision of NCCI's filed loss costs, rates, and experience rating ELRs only.
Yes, for Unit Statistical Data and Policy Data, the current WCIO WCPOLS and WCSTAT standard record layouts support the reporting of manual rates with three decimal places. The current manual rate field on the policy exposure record accommodates up to four decimal places and the current manual rate field on the unit exposure record accommodates up to three decimal places.
Policy Data is reported within 30 days from policy effective date, unless a more stringent time frame is required by a state’s proof of coverage requirements. Therefore, the timing of reporting a three-decimal manual rate will vary for states with an earliest possible approved filing effective date of January 1, 2026.
Unit Statistical Data is first valued at 18 months after the policy effective date and reported within two months from valuation. Therefore, reporting a three-decimal manual rate has the potential to impact Unit Statistical Data for 1st report valuations beginning on and after July 1, 2027, for states with an earliest possible approved filing effective date of January 1, 2026.
For Financial Call reporting, Column 1—Premium Standard at NCCI DSR Level is premium at the NCCI-level using the NCCI-approved loss costs or rates, which will be changing to three decimal places, upon regulatory approval.
Upon regulatory approval, for states with an earliest possible approved filing effective date in 2026, this change may impact the Financial Calls valued as of December 31, 2026, and due to NCCI in the 2027 Financial Call reporting season.
