Virginia Approves 12% Loss Cost Decrease for Workers’ Compensation

Virginia has approved a 12.0% loss cost decrease in the workers’ compensation voluntary market along with rate decreases in the assigned risk market, effective April 1, 2025.

The State Corporation Commission (SCC) approved the proposed voluntary loss costs, along with a change in the assigned risk factor, recommended by the National Council on Compensation Insurance (NCCI) in July.

The Bureau of Insurance supported the loss costs filing but opposed the -0.5% profit and contingency factor used by NCCI to calculate the assigned risk rate decreases, recommending instead a -1.5% factor. NCCI did not object to the change.

As a result of the SCC’s review, the voluntary market average decreases by classification starting April 1, 2025, will be:

• -12% industrial
• -11.1% surface coal mine
• -11.6% underground coal mine
• -4.9% Federal

For the assigned risk market, the average decreases by classification will be:

• -16.8% industrial
• -14.3 % surface coal mine
• -14.9 % underground coal mine
• -10.1% Federal

The SCC noted the concerns of the state Insurance Bureau and Consumer Counsel with the methodology NCCI uses to arrive at the profit and contingency factor for calculating assigned risk rates. The SCC directed the bureau’s working group to come to a consensus with NCCI on appropriate methods for future filings.

The NCCI filing was based on premium and loss experience as of year-end 2023 from policy years 2021 and 2022. This data showed that experience in recent years has improved, and the level observed in policy year 2022 is consistent with that observed in policy year 2021.

The NCCI reported that Virginia’s lost-time claims have generally declined over the most recent eight years and there has been continued improvement in the medical trend.

Loss costs are the portion of workers’ compensation rates that are used to pay losses but not insurer expenses. Carriers can use the approved loss costs as the basis for their rates, typically adjusting them for their own expenses.

The assigned risk rate is for policies written through the plan that provides insurance coverage to businesses that are unable to obtain coverage in the private voluntary market. For the assigned risk market, NCCI files a full rate that includes the servicing carriers’ expenses.

According to NCCI, countrywide the workers’ compensation system continues to be healthy. While consumer inflation has been elevated, the inflation for workers compensation medical costs remained stable. Increases in indemnity severity have been largely driven by increased wages. Also, claim frequency has continued to decline and benefit costs have been at or below the level of wage growth.

Topics Trends Profit Loss Workers' Compensation Talent Virginia