Glossary  /  Premium mechanics

Loss cost

A loss cost is the portion of a workers' compensation rate that reflects expected claim payments for a classification, before a carrier adds its own expenses and profit.

In most states a rating bureau publishes loss costs by class code, and each carrier applies its own multiplier to arrive at the rate it charges.

Loss costs are refiled periodically as claim data changes. A decade of declining loss costs is the main reason workers' compensation rates have fallen across most of the country.

Related terms

  • Rate per $100 of payrollWorkers' compensation rates are expressed per $100 of payroll, so a rate of 7.50 means $7.50 of premium for every $100 paid to employees in that classification.
  • NCCINCCI, the National Council on Compensation Insurance, is the rating and data organization that maintains the classification system and files loss costs for workers' compensation in most US states.

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