Glossary · PA Workers' Comp

Loss Cost Multiplier (LCM)

The carrier-specific multiplier applied to PCRB loss costs to produce a final workers' comp rate, reflecting the insurer's expenses, profit, and competitive position.

Definition

The Loss Cost Multiplier (LCM) is a number — typically ranging from 1.20 to 1.80 in the Pennsylvania market — that each workers' comp insurer files with the Pennsylvania Insurance Department. It is multiplied by the PCRB loss cost to produce the carrier's actual rate for a given class code.

Why the LCM Is the Key to Shopping PA Workers' Comp

Because all PA insurers start from the same PCRB loss costs, the LCM is the primary mechanism of rate competition. A carrier with an LCM of 1.30 will write the same class code for significantly less than a carrier with an LCM of 1.60 — all else being equal.

LCMs are not uniform across class codes — a carrier may file a low LCM for the hospitality industry where they want to grow market share, and a high LCM for roofing where they don't want the business. This is why shopping carriers is especially important for high-hazard industries.

LCMs also reflect the carrier's internal expense structure. Direct writers (no agents/brokers) may file lower LCMs because they don't pay commission. Large national carriers may file differently than regional specialists.