Loss Development Factor - Workers Comp Term Of The Day

The Loss Development Factor also known as LDF is an element used to adjust losses to reflect the Incurred But Not Reported losses (IBNR) under the retrospective method of rating.

Where I have seen LDF's used the most are for Workers Comp Self Insureds. The LDF is somewhat analogous to the Experience Modification Factors (E-Mod or X-Mods). LDF's are usually calculated using the actuarial Triangulation Method. I have calculated LDF's for self insureds for up to 10 years in the future.

If you are a self-insured and do not have an LDF, it is best to have one for future forecasting of the IBNR and existing claims. There are software packages that will calculate the LDF's, but the info to be input may need to be adjusted to your specific Workers Comp situation. One size does not fit all with LDF's.