Delaware Rejects 10% Workers’ Comp Hike; Signals 8% Would Be Approved

November 8, 2005

Delaware Insurance Commissioner Matt Denn said today he would not approve a proposed 10 percent increase in the workers’ compensation insurance rates, telling insurance companies that he would however approve a lower rate increase closer to 8 percent.

The move followed the first-ever public hearing on workers’ comp insurance rates in Delaware.

The Delaware Compensation Ratings Bureau, which submits a rate application on behalf of all companies that sell workers’ comp insurance in the state, had applied for base rate increases between 9.1 and 10.2 percent.

Denn notified DCRB that he would approve base increases between 7.1 and 8.1 percent, which matches the amount recommended by a separate actuarial review.

According to Denn, DCRB’s proposed rate was based in part on a history of medical costs that included an unusual spike in costs in 2000. During the public hearing on October 26, DCRB representatives said they could not explain the spike, but had opted to factor the higher costs into future projections.

Denn said that a separate actuarial review suggested that the spike in costs could be treated as an anomaly and not be factored into future rates.

“Having received no specific information regarding 2000 medical costs that explains why they were so high or any indication that they are or are not likely to recur at that level, I believe my responsibility to Delaware policyholders requires me to accept the lower of the two actuarially sound projections,” Denn said.

By law, the insurance commissioner can only approve or reject a rate application. However, Commissioner Denn indicated to DCRB that if it submitted a new application with the lower discussed rate increase, he would approve it.

Denn said that DCRB has agreed to prepare an amended application for the lower rates.

This is the first application for an increase in workers compensation insurance rates since Denn took office in January 2005. Denn revamped the process, ordering an independent actuarial review of the application, assembling a group of business and labor representatives to review the application and the actuarial report, and holding a first-ever public hearing to receive public comment.

In 2004, the base workers’ comp insurance rates increased by 13.5 to 16.7 percent, about twice this year’s increase.

“One of my main goals as Insurance Commissioner is to control the costs of insurance and I believe a more public process for workers’ compensation rates will help accomplish that,” Denn said. “I think this new process has worked well and I plan to use the same process in the future.”

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