Workers’ Comp Costs Continue Down in Southeast States

Workers’ compensation costs are falling across most of the Southeast, with Georgia being the latest state to see insurers file for loss cost and rate reductions.

Georgia follows Florida, South Carolina, Kentucky and West Virginia in reporting lower loss costs this year. A cost reduction is awaiting approval in Mississippi.

The reductions suggest an improved economy and reduced claims frequency across the region.

Georgia

The National Council on Compensation Insurance (NCCI), which represents insurers, recently proposed an average 3.3 percent loss cost decrease effective March 1, 2015.

If approved as filed, the changes by industry group would be as follows: -5.7 percent for manufacturing; -1.8 percent for contracting; -7.0 percent for office and clerical; -2.6 percent for goods and services; and -1.2 percent for miscellaneous.

The Georgia filing proposes no change to the current assigned risk rate level in effect since March 1, 2014.

The NCCI filing is based on premium and loss experience for policy years 2011 and 2012. Experience for policy year 2012 is more favorable than that for policy year 2011, NCCI said. Following several years of increases, Georgia’s lost-time claim frequency declined in the most recent policy year and the state’s indemnity and medical loss ratios have improved over the recent past, according to the industry.

Mississippi

Employers in Mississippi could soon be paying less for workers’ compensation, pending approval of a rate filing being reviewed by actuaries at the Mississippi Insurance Department. NCCI has submitted a filing for an average 3.2 percent statewide rate reduction.

If the new rates are approved, they would become effective March 1, 2015

“At a time when we are seeing so many filings and rate requests for premium increases, this is a most positive indicator reflecting on the overall stability of the workers’ comp market in the state,” Insurance Commissioner Mike Chaney said.

NCCI attributes the rate decrease in part to a growing economy and a decrease in claims frequency. The data from the insurers’ rating organization shows that 24,300 claims were filed in 2013, according to Chaney.

Kentucky

In Kentucky, workers’ compensation loss costs fell for the ninth straight year effective Oct. 1.

The new loss cost figures show an average reduction of 6.9 percent for the 586 industrial classes used in Kentucky. The industrial classes include manufacturing, office and clerical, contracting, and goods and services. For coal classes, surface mining increased 3.1 percent and underground mining costs decreased 7.7 percent.

“NCCI reports that the industry is becoming more balanced,” said Kentucky Insurance Commissioner Sharon P. Clark. “This is good news for Kentucky as we have seen a combined reduction of 50.4 percent in the last nine loss cost filings.”

Clark said the combined efforts of Gov. Steve Beshear’s administration, the state’s General Assembly, employers and employees who are excelling in safety initiatives, and successful attempts to control medical costs have resulted in a positive impact on Kentucky’s workers’ comp market.

South Carolina

South Carolina’s workers’ compensation premiums started going down an average 7.4 percent Sept. 1.

The decrease was welcome news for employers after two years of modest rate increases. In 2012, loss cost rates increased by three percent and last year they went up 1.1 percent.

“We’ve had a good sign when it comes to frequency and severity and this is another positive for businesses in South Carolina,” said Director of Insurance Ray Farmer.

The South Carolina 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 NCCI filing called for an 8.7 percent drop in loss costs for manufacturing classes, a seven percent reduction for contracting classes and a 9.7 percent drop for office and clerical classes. Goods and services classes should see a 6.1 percent reduction and miscellaneous classes, a 6.4 percent drop.

NCCI attributed the favorable results to an increase in premium volume, improvement in the state’s combined ratio and a claim frequency that has stabilized at 18 claims per $1 million of premium.

“The observed trend in South Carolina claim frequency has been relatively flat over the most recent six-to-seven-year time period,” said NCCI.

The 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.

Florida

In Florida rates are headed down slightly more than insurers recommended. Florida Insurance Commissioner Kevin McCarty recently disapproved NCCI’s proposed 3.3 percent overall decrease but said he would approve a bigger 5.2 percent reduction instead.

NCCI, on behalf of 250 workers’ comp insurers, was expected to re-file for the 5.2 percent and receive final approval, according to the Florida Office of Insurance Regulation (OIR).

The new rates will be effective Jan. 1, 2015 for new and renewal policies.

The OIR said that the original NCCI filing reflected an increase in the underwriting profit and contingency provision from its current approved 2.5 percent to 4.5 percent that was deemed excessive.

“Just last year, NCCI requested and was approved for a 2.5 percent profit and contingency provision and the record does not reflect any significant change in the economy in the past year that would justify a near doubling of the underwriting profit,” said McCarty. “Florida’s workers’ compensation market is functioning very well, taking into account current economic conditions, and we want to ensure it remains doing so.”

The re-filing by the OIR is to include a negative 2 percent annual trend for indemnity costs and a positive 0.5 percent annual trend for medical costs.

West Virginia

In July, NCCI proposed 9.1 percent reduction in workers’ compensation loss cost rates in West Virginia – the tenth reduction in 10 years. The new rates were effective Nov. 1. The decrease amounts to $32 million in savings for employers in the coming year.

Since workers’ comp was privatized in 2005, rates have been cut $280 million.

“We’ve worked hard in West Virginia to create a business climate that encourages companies to innovate, expand and create new jobs,” said Gov. Earl Ray Tomblin.

“With this rate reduction, businesses are reaping the rewards of both lower taxes and lower workers’ compensation premiums. The new rates are an excellent sign that our state continues to move in the right direction for continued job growth.”