The purpose of the assigned risk mandatory
Loss Sensitive Rating Plan (LSRP) (PDF) is to provide a retrospective rating plan for those employers who have an assigned risk workers compensation insurance premium of $250,000 or more.
The LSRP is designed to:
Encourage safety and loss prevention
Depopulate the residual market
Provide incentives for employers with favorable loss experience through lower premiums.
Provide disincentives for employers with an unfavorable loss experience through higher premium
The residual market is intended to serve as the market of last resort to all eligible employers required by law to secure workers compensation coverage, but that are unable to obtain it through other means. (This includes such options as self-insurance.) The residual market is not intended to compete with the voluntary market by allowing employers to avoid various LSRP offers in exchange for guaranteed cost policies.
The LSRP can apply on an intrastate or interstate basis. For a multistate risk, LSRP will apply when the total LSRP standard premium of all states that have approved LSRP meets the LSRP standard premium eligibility requirement.
The following unique payment provisions apply:
LSRP contingency deposit of an additional 20% is calculated from the total standard premium only in those states that have approved the LSRP. By definition, standard premium does not include premium discount
Irrevocable letter of credit for the additional 20% can be provided in lieu of cash payment at the time of application or policy renewal. The letter of credit must contain automatic renewal clause, drawn on a Federal Reserve Bank. The cash deposit or Irrevocable Letter of Credit (ILOC) shall be held as collateral until at least the first adjustment.
LSRP currently applies in AZ, AL, CT, DC, GA, ID, IL, IN, KS, MS, NV, NH, NC, OR, SC, SD, TN, VT and WV.