Workers Comp Term Of The Day - Loss Development Factor (LDF)

A Loss Development Factor or LDF is akin to an Experience Modification Factor. It is the element used to adjust losses to reflect the IBNR (Incurred But Not Reported) under the retrospective method of rating.

The LDF also takes into account the complications that can arise as a claim develops. Most LDF's are scheduled out over 10 years of claims development using the actuarial triangulation method. I have seen large self insureds that did not have LDF's calculated. The lack of using an LDF can result in improper budgeting for development.