Controlling Workers Compensation Costs for Employers

Wednesday, February 21st 2018

Last updateSun, 16 Oct 2016 2am

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Term Definition

Allocated Loss Adjustment Expenses; expenses that can be assigned to a specific claim, such as legal fees.


Arising out of Employment / In Course of Employment


AY means ‘accident year’. It is the same thing as PY or ‘policy year’. This is important to differentiate from calendar year.

Caveat Emptor

Latin for "let the buyer beware." A doctrine that often places on buyers the burden to reasonably examine property before purchase and take responsibility for its condition.  [From]


Calendar Year is the year premiums are earned or costs are paid. All premiums and costs are accounted for on cash basis.

California Department of Insurance
Insurance Company of the West – most often referred to as "ICW"
Incurred Costs

All costs of a claim – both current and future. This figure is a combination of paid costs and reserves against future costs.


Indemnity – an injury that causes the injured worker to lose time from work. In order to be classified as an Indemnity claim, the injured worker must receive Temporary Total Disability (TTD) or Permanent Disability (PD) payments.


MedOnly - an injury that required medical treatment only. There is no lost time and the injured worker doesn't receive Temporary Total Disability (TTD) or Permanent Disability (PD) payments.

Pure Premium Advisory Rates

Pure Premium Advisory Rates. These rates are 'advisory' only. They are meant to serve as a guideline for insurance carriers to help them establish their published rates.

No carrier is required to follow the advisory rates – they can publish their own rates independent of the WCIRB's rates.


Policy Year is the same as Accident Year ( AY ). It is the year that the premiums are charged and all costs are incurred. All premiums and costs are accounted for on an accrual basis.

Top 50 Carriers

The Top 50 Carriers, representing over 80% of all premiums written, have rates published on the Department of Insurance web-site.


Temporary Total Disability payments. See for more details.

Unit Stats

"Unit Stats" is a Shortened term for 'California Workers' Compensation Unit Statistical Reporting Plan – 1995'. This is the document that outlines how the insurance carriers are required to report payroll levels and losses to the WCIRB. The information is used to gather payroll and loss information that will be used, in part, to calculate the Pure Premium Advisory Rates and the Expected Losses for the Experience Modification calculation.

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