Loss Cost Multiplier (LCM)

The loss cost multiplier (LCM) is how an individual carrier turns a rating bureau's advisory loss cost into a rate it can actually charge. The bureau files the pure claims cost; the carrier files an LCM that loads in its expenses, commissions, taxes, and target profit, plus its own actuarial adjustment. The math is simple: manual rate = advisory loss cost × LCM.

Typical small-business LCMs run in the 1.20–1.50 band, but they vary by carrier and can differ by class. Because every carrier files its own LCM, the same NCCI loss cost produces different quotes across insurers — a carrier with a 1.20 LCM undercuts one at 1.45 on identical exposure. That's a big reason it pays to compare quotes even when the underlying loss cost is fixed.

LCMs apply in loss-cost states (most states). In monopolistic and administered-pricing states the state fund or bureau publishes a final rate with expense and profit already built in, so no carrier LCM is applied. See how this changes the math in our WC loss-cost study.