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All Risk Adjustment Program (ARAP)

Eligibility:

A risk shall be eligible for the All Risk Adjustment Program (ARAP) if it is eligible for experience rating, either on an intrastate or interstate basis, and the R value*, the weighted test Ratio, for the insured is greater than 1.0.

The All Risk Adjustment Program (ARAP) surcharges experience rated risks, both voluntary and assigned risk, with a record of losses greater than expected under the Experience Rating Plan. The purpose of this program is to provide a revised pricing mechanism for experience rated risks to share in the underwriting losses they generate. The application of this program is mandatory for all eligible insureds and shall apply to all policies written for such insureds.

The WCRIBMA will calculate the ARAP adjustment and identify it as a separate factor on the Experience Rating Calculation sheet. For ratings effective before September 1, 2007, the ARAP factor, expressed as a debit percentage, can range from unity (1.00) to a maximum surcharge of 1.49.  For ratings effective September 1, 2007 and after, the maximum ARAP surcharge factor decreased from 1.49 to 1.25. The ARAP premium adjustment is reported under the statistical class code 0277.

Effective January 1, 2008, the ARAP factor is applied to the policy's Standard Premium. (The Deductible Credit was moved inside of Standard Premium effective January 1, 2008.)

Before January 1, 2008, the ARAP factor was applied to the policy's Standard Premium less a Massachusetts Benefits Deductible Program credit or a Massachusetts Benefits Claim and Aggregate Deductible Program credit, if applicable. Refer to the Massachusetts Voluntary Market Premium Algorithm, Appendix E, or the Residual Market Premium Algorithm, Appendix F.

Experience rated risks with multi-state operations are subject to the ARAP surcharge for that portion of the risk in Massachusetts. The ARAP factor is calculated using Massachusetts losses and expected losses. The ARAP surcharge is applied to the Massachusetts portion of the premium.

Click on the following link for an explanation of the ARAP calculation.

For more information on the All Risk Adjustment Program, refer to NCCI's Experience Rating Plan Manual, Massachusetts, State Rule Exceptions, Miscellaneous Rules.


Program References:

September 1, 2007 - The maximum ARAP surcharge factor decreased from 1.49 to 1.25.
(Refer to Circular Letter #2054 dated May 18, 2007.)

January 1, 1994 - The enhanced ARAP formula, approved January 1, 1993, was eliminated. The ARAP formula was restored to the terms and conditions of ARAP as they existed immediately before the 1993 revision.  
(Refer to Circular Letter #1662 dated January 14, 1994.)

January 1, 1993 - The Division of Insurance approved an enhanced All Risk Adjustment Program (ARAP) formula in view of the approval of the Massachusetts Assigned Risk Rating Plan (MARRP).  (Refer to Circular Letter #1616 dated January 7, 1993.)   

January 1, 1990 - The Division of Insurance approved the All Risk Adjustment Program (ARAP).   (Refer to Circular Letter #1518 dated January 3, 1990, Circular Letter #1526 dated February 14, 1990 and Circular Letter #1531 dated March 7, 1990.)


Additional References:

Circular Letter #2129 dated September 17, 2009 - NCCI to Publish the Massachusetts All Risk Adjustment Program (MA ARAP) Factor on Interstate Experience Rated Risks

Circular Letter #1679 dated May 19, 1994 - Department of Industrial Accidents Assessment


*(Refer to the Experience Rating Plan Manual, Massachusetts, State Rule Exceptions, Miscellaneous Rules, All Risk Adjustment Program (ARAP) #4. Calculation.)

 


Program Overview

 

The Workers' Compensation Rating and Inspection Bureau of Massachusetts
101 Arch Street, 5th Floor
Boston, MA 02110