What Is a Loss Cost Multiplier (LCM) — And Why It Matters in Workers’ Compensation
When shopping for workers’ compensation insurance, most business owners focus on rates and experience mods. But there’s a hidden factor that can drive premiums up or down: the Loss Cost Multiplier (LCM).
Let’s break it down—and see how a major insurer like Travelers uses this tool. While we are illustrating Travelers and their filings, keep in mind all insurers employ similar multipliers.
What Is a Loss Cost Multiplier?
Every state sets “loss costs,” which are baseline estimates of expected claims costs for each job classification. These numbers are developed by bureaus like NCCI or state-specific rating agencies.
But insurers don’t just charge those raw loss costs. They apply a Loss Cost Multiplier to account for their own:
– Operating expenses
– Claims-handling and overhead
– Profit margins
– Taxes and assessments
The formula is simple:
Final Premium Rate = Loss Cost × LCM
So if the loss cost is $1.00 and the insurer’s LCM is 1.50, you’ll pay $1.50 per $100 of payroll in that class—before applying your experience mod.
How Do LCMs Vary?
LCMs vary widely across insurers—even within the same company group. A lower LCM typically means a more competitive premium, while a higher one means more markup over the base loss cost.
Here’s a look at Travelers Insurance, which operates under multiple entities. In Kansas, as an example, but true in every state, Travelers filed a wide range of LCMs:
| Travelers Company |
LCM |
| Travelers Casualty Insurance Co. of America |
2.441 |
| Travelers Property Casualty Co. of America |
2.170 |
| Travelers Indemnity Co. of Connecticut |
2.080 |
| Travelers Indemnity Co. |
1.559 |
| Travelers Indemnity Co. of America |
1.085 |
| Travelers Casualty Co. of Connecticut |
0.746 |
| Travelers Commercial Casualty Co. |
1.155 |
Why This Matters for Your Business
– Same loss cost, different premium: Two insurers with the same base rate can charge very different premiums based on their LCM.
– You can’t control the LCM—but you can choose a carrier with a more favorable one.
– Ask your broker which insurer (and specific underwriting company) they’re placing you with, and what LCM applies.
Final Takeaway
The LCM is a quiet—but powerful—factor in how your workers’ comp premium is built. By understanding which insurers file higher multipliers, you can make smarter choices and potentially save thousands.
Before you renew or quote new coverage, take a closer look at your carrier’s LCM. If you need help decoding it—or want to compare carriers side by side—reach out. It’s one of the most overlooked ways to lower your premium without sacrificing coverage.
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