Risk Financing, Insurance and Experience Rating questions for the CSP

Question 1

Two similar-sized employers in the same classification each had $50,000 in total workers' compensation losses during the experience period. Employer A had one $50,000 claim. Employer B had ten claims of about $5,000 each. A risk manager must say which employer should expect higher workers' compensation costs in the future under NCCI's reasoning. Which answer fits?

1. AEmployer A, because the cost of one claim is easier to predict than how often claims occur
2. BNeither, because equal total losses always predict equal future costs
3. CEmployer A, because one large loss predicts a pattern of future large claims
4. DEmployer B, because its higher number of losses generally signals higher future costs

Question 2

A state's per-claim accident limitation is $200,000. An employer has one workers' compensation claim that totals $500,000. A safety director is asked how much of this claim is used to calculate the employer's experience mod. What should the director report?

1. A$200,000 as ratable loss, with the remaining $300,000 excluded as non-ratable
2. BThe full $500,000, because severe claims must be fully counted
3. C$300,000 as ratable loss, with the first $200,000 excluded
4. D$0, because a claim above the limitation is removed from the experience period

Question 3

A state requires $14,000 in audited premium subject to experience rating in the most recent two years of the experience period, or an average of $7,000 over the overall experience period. An employer for the 2026 mod had audited subject premium of $6,000 for 2024, $6,800 for 2023, and $8,500 for 2022. What is the correct conclusion?

1. AIt does not qualify, because the most recent two years total only $12,800
2. BIt qualifies through the three-year average of about $7,100, so experience rating is mandatory
3. CIt qualifies only if the employer chooses to be experience rated, because the two-year test was missed
4. DIt does not qualify, because the average of the three years is below $7,000

Question 4

A fabrication company's mod worksheet shows adjusted actual losses of $258,000 and adjusted expected losses of $300,000. The mod is adjusted actual losses divided by adjusted expected losses. The company's manual premium at renewal is $150,000. What premium results after the mod is applied to the manual premium?

1. A$174,419
2. B$108,000
3. C$150,000
4. D$129,000

Question 5

A state has approved the Experience Rating Adjustment (ERA). A manufacturer has one medical-only workers' compensation claim of $40,000 in its experience period. The split point puts $18,500 in the primary portion and $21,500 in the excess portion. A safety director wants to know how much of this claim will count in the mod calculation. What total amount will be included?

1. A$28,000, which is the claim after a 70% reduction is taken off the primary portion only
2. B$40,000, which is the full claim because it was paid and reported
3. C$12,000, which is 30% of the primary and excess portions combined
4. D$18,500, which is the primary portion with the excess portion left out

Question 6

Two similar employers in the same state and classification are both subject to experience rating. Employer A has a rating effective date of April 1. Employer B has a rating effective date of October 1. A risk manager at Employer B assumes both companies' mods use exactly the same policy years because of the shared state and class. Which statement is correct?

1. AThe experience periods can differ because each employer's rating effective date sets its own experience period
2. BBoth mods use the same policy years because the state sets one experience period for all employers
3. CBoth mods use the same policy years because the experience period starts on the date of each employer's largest claim
4. DThe experience periods can differ only if one employer has a medical-only claim in the period