The Deposit Contribution process is the apportioning of an agency’s contribution towards their pool’s Target Contribution. For agencies in their own pool the Target Contribution is the same as the Deposit Contribution.
The methodology for this calculation is different for each line of business i.e. workers compensation and liability have a different calculation method. Essentially, the Target Contribution is the blended average of an agency’s industry benchmark contribution and their previous claims experience.
The Deposit Contributions made by icare tmf agencies are a reflection of exposure and experience. They are calculated by actuaries using industry benchmarks, claims experience and assessment of risk exposures.
Deposit Contributions are set based on a weighting between an agency’s own experience and an appropriate external contribution measure (e.g. for workers compensation, this is known as the Industry Benchmark Contribution). Agencies can impact their deposit contribution by effective management of claims, claim prevention and management of risks.
Included in this methodology is a calculation to determine an agency’s Credibility Factor. The Credibility Factor is how much claims experience can be relied upon to indicate future claims costs. The larger the agency, the greater the Credibility Factor will be. This is because larger agencies have a more stable history of claims experience that can be used as a more accurate basis for future claims.