Welcome to ALFs on Demand

Posted Date: July 16, 2018
    

Industry Information

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Thumbnail By Tom Daley, ACAS, MAAA, Director & Actuary, NCCI

The workers compensation industry can now benefit from a new, innovative solution for generating policy-specific results to price retrospectively rated business. Actuarial experts from NCCI (The National Council on Compensation Insurance) have developed Aggregate Loss Factors (ALFs) on Demand—a revolutionary online application designed to provide great value to the industry.

Power Your Analysis!

What makes ALFs on Demand valuable is that once users input policy-specific information into the application, it performs many complex calculations in real time. This calculation-driven computing power is especially helpful for analyzing large risks with multistate exposures. ALFs on Demand offers flexible options for inputting information from one policy … or a batch of policies.

Who Is the User?

If you’re an actuary or underwriter, this can become a valuable tool within your analytical toolbox. It greatly improves the accuracy of the insurance charges (which we’ve recently renamed “aggregate excess loss factors”) by using state-specific parameters throughout the calculations. It provides you with the ability to view or download:

  • 1,001 aggregate excess loss factors for each policy
  • Each policy’s excess ratio for a given loss limit
  • Basic premium factor calculations
  • Aggregate loss distributions
  • Many other valuable policy metrics

How Does It Work?

As a replacement to the Retrospective Rating Table of Insurance Charges (Table M), NCCI filed the methodology underlying ALFs on Demand under our Retrospective Rating Plan Manual for Workers Compensation and Employers Liability Insurance. The factors this tool produces are intended for workers compensation policies with effective dates of January 1, 2019, and subsequent. Regulators in many NCCI jurisdictions have approved its use, and NCCI hopes to partner with, and include data from, other independent bureaus that choose to adopt and file the methodology for their respective states.

Within the application, NCCI will include Retrospective Rating Plan data elements for states soon after the loss cost/rate filing is approved. This makes for a dynamic application that will automatically refresh the underlying data as state approvals occur.

What’s Next?

Beyond this initial release, NCCI plans to add further functionality to the new tool, such as data visualization, automatic state filing updates, a Web service option, and detailed technical documentation.

If you want valuable policy-specific metrics and appreciate the ability to obtain your data quickly, you should explore ALFs on Demand. Access for NCCI affiliates is included as part of your affiliation agreement. To find out more, contact our Customer Service Center at 800-NCCI-123.

About the Author

Tom Daley, ACAS, MAAA, Director & Actuary—Actuarial & Economic Services for NCCI, leads the individual risk rating research activities in the Research & Development practice area and has state actuary ratemaking responsibilities. Tom has authored several papers published by the Casualty Actuarial Society in Variance and the CAS E-Forum. He received his BS degree in mathematics and actuarial science from Penn State.

This article is provided solely as a reference tool to be used for informational purposes only. The information in this article shall not be construed or interpreted as providing legal or any other advice. Use of this article for any purpose other than as set forth herein is strictly prohibited.