The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, 1931-07-14
W0RKMEN'S BODY
CHANGES SYSTEM
OF Rate MAKING
New System Is More Reliable
and Stabilized, Says Com
pensation Chairman

Complete revision Of its rate -mak.
Ing procedure has been effected by
the North Dakota Workmen's Com
p~ensation Bureau, according to r. E.
Wenzel, chairman.
Under the new system, according
to Wenzel, a more reliable more
stabilized and more satisfactory rate
structure for the future is in pros
pect. Another benefit is that it will
not raise the rates for compensation
insurance to be charged this year.
Wenzel said.
The cost Of claims is divided by the
new system into normal cost and ex-
cess cost. the first $500 of every claim
being charged to normal cost, the bal
ance. II any, to excess cost.
Pure premiums fthe ratio OF losses
to payrolls) are featured for each
classifications and for the fund tall Of
the classifications combined) on the
basis Of normal and excess costs.
A modified pure premium for rate.
making is found by totaling the fol-
lowing: IS per cent OF the normal
manual classification pure prem
ium, five per cent of the normal fund
pure premium. 40 per cent Of the
manual classification excess pure
premium, and 60 per cent Of the fund
excess pure premium. Payrol!s and
awards for the last five years are used
as the base.
Reduce Minimum Charges
Minimum premium charges also
have been changed under the new
plan. Private compensation insur-
ance carriers charge a minimum
premium equal to Is times the man.
ual rate plus IS. With the exception
of the office and school manuals, the
state bureau will require a minimum
rate plus 50. hereafter.
"In discussing the effect Of the de-
preston upon workmen's compensa-
ton in this and other states about a
month ago." Wenzel said, reference
was made to certain facts, including
the allowance Of IN increase of 81
per cent in the general level OF rates
in n Of the private insurance states.
Our consulting actuary, in his report,
gave it as his opinion that 1t would
be necessary, on the same grounds ad-
vanced elsewhere, to increase the
present broad average level Of rates
flor North Dakota Is per cent He
followed this statement. however,
with another: If your bureau de-
cides to maintain the present broad
level for the coming year. from the
viewpoint Of broad policy. I would
not challenge such an act on your
part"
A responsibility is placed upon en-
ployers and employees to cooperate
to cut down accidents and awards
since the bureau is not raising the
general level Of rates, Wenzel said.
He pointed out that premiums paid
this year will be greatly reduced be-
cause Of the general cut in salaries
and wages. upon which the rates are
based.
illustrates New Plan
To illustrate the new rate-making
procedure. Wenzel gave the following
illustration:
Suppose a classification, on its own
merits, had developed a pure prem
ium Of s1.80 per sl00 OF payroll. {
Separating this under the pan Of
normal and excess cost. the normal
pure premium is found to be $50
and the excess is ST.. It also Is found !
that the normal pure premium for
the fund as a whole is $50 and the
excess pure premium for the fund is
$50, making a net pure premium for
the fund as a whole OF $l.l0 per 500
Of payroll.
Under the old plan the classifica-
ton would be subject to 81 go per 500
OF payroll, plus the percentage neces-
sary to provide reserves and admin
1stration expenses.
Under the new, modified rating
system. the result would be as fol-
lows:
IS per cent of $50 normal
pure premium is..........$ rs
5 per cent Of $50 (fund nor
ma Premium is .......... 90
40 per cent of ST (excess
manuaD Is ............. 40
so per cent of $50 fund ex-
cess is 80
Pure premium for rate-mak-
ing $l.49
The rate-making premium for the
classification, which 1t alone develop
ed. therefore is S1.49 instead Of $3.50
Assuming the expense and reserve :
loading to be Is per cent, the total Z
rate would be 81 "a against q rate If