NCCI Extends ELR Precision to Three Decimals in 2026

NCCI published its expected loss rates to three decimal places for the first time effective January 1, 2026. The change applies across all 38 states where NCCI provides ratemaking services, including Florida, Georgia, North Carolina, South Carolina, Tennessee, and Alabama.

Most contractors won't hear about this. It looks like a filing administrative detail. It isn't.

What expected loss rates are and why they matter

In the NCCI experience rating formula, every claim a contractor reports gets compared to what NCCI expected that contractor to produce, given their payroll, their job classifications, and the historical loss rates for those classes.

The Expected Loss Rate (ELR) is the key input: a dollar figure per $100 of payroll that represents expected losses for a given classification code. ELRs are calculated from years of industry-wide claim data and updated periodically to reflect changing loss costs.

The EMR is essentially a ratio. Actual losses divided by expected losses. If actual losses are lower than expected, the mod falls below 1.00. If they're higher, it rises above 1.00. The ELR sets the denominator of that comparison, which means any deviation in the ELR directly affects where the modifier lands.

What moving from two decimals to three actually does

Before January 1, 2026, NCCI expressed ELRs rounded to two decimal places. The smallest possible value was $0.01 per $100 of payroll. A classification whose actuarially derived rate sat between $0.08 and $0.09 would be assigned one or the other, depending on which way the rounding fell.

After the change, ELRs are expressed to three decimal places. The smallest possible value is $0.001 per $100 of payroll. A classification that previously couldn't move from $0.08 to $0.09 without a full 12.5% jump can now move to $0.081, $0.082, and so on.

NCI's circular on the change notes that it allows loss cost changes as small as 0.1% to be filed and approved immediately, rather than requiring accumulation to a 1% threshold before any change could take effect (NCCI Decimal Extension Circular, January 2026). In actuarial terms, this is a meaningful improvement in signal fidelity. Small year-to-year cost movements in a class no longer have to wait for a rounding threshold to be breached before they show up in the ELR.

Which classes see the most impact

The extension applies to all NCCI classification codes across all 38 states. In practice, the most impacted classifications are those at lower absolute ELR levels, where the relative significance of rounding is largest.

A $0.05 ELR rounded from $0.049 is a 2% deviation from the actuarial value. At a $1.50 ELR for a high-hazard construction class, the same rounding at the third decimal place is proportionally much smaller. For lower-hazard classifications, where ELRs are sometimes well below $0.10, the two-decimal ceiling was a real constraint on actuarial precision.

For construction contractors in Florida, Georgia, the Carolinas, Alabama, and Tennessee, all NCCI-administered states, three-decimal ELRs are already in effect for the current policy year. Any experience rating worksheet issued after January 1, 2026 should reflect the new precision.

What it means for experience rating worksheets

Each classification on a contractor's worksheet carries an ELR. That ELR gets multiplied against three years of payroll to produce expected primary and excess losses, the denominator in the mod calculation. A small ELR error compounds across three policy years of payroll.

For a contractor with $2 million in payroll per year in a given classification, an ELR deviation of $0.005 per $100 of payroll translates to $100 in expected losses per policy year. Across three years, that's $300. On a low-volume class where expected losses are a few thousand dollars, a $300 deviation is meaningful. The denominator gets smaller, and the mod can move.

What an audit would check

An audit verifies that the ELRs applied on a contractor's experience rating worksheet match the published NCCI rates for each classification in the correct state and effective date. Before the decimal extension, rounding errors were smaller in absolute terms but still present. Under three-decimal precision, the applied ELR should match the published rate exactly. A discrepancy at the third decimal place, multiplied by three years of payroll in each affected class, can shift expected losses enough to move the modifier. The compounding is what makes this worth checking.

If you want to confirm whether your worksheet reflects the correct ELRs for your classifications and state, send it to us for a mod review before your next renewal.