P&CIllinoismedium
In Illinois workers' compensation rate filings under 215 ILCS 5/456, what is the function of an insurer's loss cost multiplier (LCM)?
AIt sets the minimum benefit payable to injured workers
BIt determines the surplus lines tax owed on the policy
CIt calculates the IDOI examination fee
It converts NCCI prospective loss costs into the insurer's final rates by adding expenses, profit, and contingencies
Why this is the answer
Under 215 ILCS 5/456, Illinois workers' compensation insurers use a loss cost multiplier to convert NCCI's filed prospective loss costs into final policy rates. The LCM loads expenses (acquisition, general, taxes, licenses, and fees), underwriting profit, and contingency margins onto the pure loss costs. Each insurer files its own LCM with the IDOI, enabling competition on expense efficiency while NCCI handles loss-cost data.
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