South Carolina employers should see their workers’ compensation premiums go down this year since regulators have approved an average 7.4 percent decrease in the state’s loss costs.
Director of Insurance Ray Farmer approved the new rates, which are scheduled to take effect Sept. 1.
Farmer said the decrease is welcome, 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 cost rates increased by three percent and last year they went up 1.1 percent.
The National Council on Compensation Insurance (NCCI) filed for the decrease. The filing is based on premium and loss experience for policy years 2010 and 2011 and experience for each of these policy years is more favorable than policy year 2009, according to NCCI.
The loss cost portion of the rates reflects only the benefits paid by insurers for medical and wage loss. Each insurer determines its own rates by adding loss experience, administrative costs and profit and contingency factors.
The NCCI filing identified a minus 7.5 percent in experience and trend, a plus 0.3 percent in benefits and a minus 0.2 percent reduction in loss adjustment expenses.
That experience translated into a minus 8.7 percent drop in loss costs for manufacturing classes, a minus seven percent reduction for contracting classes and a 9.7 percent drop for office and clerical classes. Goods and services classes will see a 6.1 percent reduction and miscellaneous classes, a 6.4 percent drop.
NCCI said that an increase in premium volume, improvement in the state’s combined ratio 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,” said NCCI.
An increase in premium volume is one sign that South Carolina is emerging from the 2007-2008 recession.
In 2007, insurers reported total direct written premium of $799 million. That dropped to $533 million in 2010 before starting to grow again. In 2013, premium volume is expected to reach $663 million, which is starting to mirror pre-recession numbers.
South Carolina’s accident year combined ratio has 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 stabilized at 18 claims per $1 million of premium.
Also driving the overall loss cost decrease are 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 in the state. Liberty Mutual leads the way with 12 percent of the market, followed by Hartford Insurance Group, (9 percent), AIG and Travelers (6 percent each) and Zurich American (5 percent).