South Carolina employers could see their workers’ compensation premiums go down later this year after regulators approved an average 7.4 percent decrease in the state’s loss costs.
Director of Insurance Ray Farmer has approved the new rates, which are scheduled to take effect as of September 1.
Farmer said the rate decrease is welcomed, especially after two years of modest rate increases.
“We’ve had a good sign when it comes to frequency and severity and this is another positive for businesses in South Carolina,” said Farmer.
In 2012 , loss costs rates increased by three percent and last year they went up by 1.1 percent.
The National Council on Compensation Insurance filed for decrease. According to NCCI, part of the decrease is due to an improvement in the state’s system since 2009. “The filing is based on premium and loss experience for policy years 2010 and 2011,” stated NCCI. “Experience for each of these policy years is more favorable than policy year 2009.”
NCCI reported that the decrease was attributable to a minus 7.5 percent in experience and trend, a plus 0.3 percent in benefits and a minor minus 0.2 percent reduction in loss adjustment expenses.
Those reductions translate into a minus 8.7 percent drop in manufacturing classes, a minus seven percent reduction in contracting classes and a 9.7 percent drop in office and clerical classes. Goods and services classes would see a 6.1 percent reduction and miscellaneous classes a minus 6.4 percent.
The loss cost portion of the rates reflects only the amount of benefits paid by insurers for medical and wage loss benefits. Each insurer’s rates are then determined by adding loss experience, administration costs and profit and contingency factors.
NCCI said that an increase in premium volume, improvement in the state’s combined ratios and a stable claim frequency also contributed to the filing.
“The observed trend in South Carolina claim frequency has been relatively flat over the most recent six-to-seven-year time period,” stated NCCI.
The increase in premium volume is one sign that South Carolina is emerging from the 2007-2008 recession.
Premium Volume Up
In 2007, insurers reported a total direct written premium of $799 million. That number dropped to a low of $533 million in 2010 before starting to inch upward in the following years. For 2013, premium volume is expected to reach $663 million, which is starting to mirror pre-recession numbers.
South Carolina’s accident year combine ratios have also dropped precipitously. After registering a high of 117 percent in 2010, the ratio fell to 102 percent in 2012.
The state’s claim frequency has also stabilized at 18 claims per million dollars of premium. Also driving the overall loss cost rate decrease is relatively small changes in wage loss and medical costs.
In 2011, the average loss-time claim declined by 3.8 percent to $29,000 per claim while medical cost inched up just 1.9 percent to $23,000 per claim.
According to the Department of Insurance, there are currently 288 insurers offering workers’ compensation. Leading the way is Liberty Mutual Group, which represents 12 percent of the market. It is followed by the Hartford Insurance Group at nine percent, AIG Insurance Group at six percent and Travelers Insurance Group at six percent. Zurich American Group rounds out the top five with five percent of the market.