South Carolina employers could see their workers’ compensation premiums increase next year if state regulators go along with a proposed 7.3 percent increase in the state’s loss cost rates.
The National Council on Compensation Insurance filed for the proposed increase earlier this month, making it the first such proposed increase since 2008. Most recently, the state has seen three loss cost decreases totaling 13.4 percent.
Based on 2009 and 2008 policy year data, the rate filing calls for a 5.3 percent increase in experience, a 2.2 percent increase in trend, a 0.1 percent increase in benefits, and a slight decrease of 0.4 percent in loss adjustment expenses.
Even if the current proposed rate change is approved as filed by South Carolina Acting Insurance Commissioner Gwendolyn Fuller McGriff, employers will still have seen a cumulative decrease of 7.1 percent since 2009.
The loss cost portion of rates reflects only the amount of dollars actually paid out by insurers for medical and indemnity benefits. Each insurer’s rates are then determined by combining the loss cost factor with its own loss experience, administrative, and profit and contingency factors.
NCCI cited two primary cost drivers including a negative change in the state’s lost-time claim frequency and upward pressure on both medical and indemnity costs.
“Increasing claim frequency in combination with indemnity and medical cost growth could place a notable strain on the state’s workers’ compensation system,” said NCCI in a statement.
Looking at 2008 and 2009 data, the state’s claim frequency rate has largely leveled off since 2007 after posting six consecutive years of declines. South Carolina’s claims frequency rate is now 930 claims per 100,000 workers, which is substantially higher than the roughly 750 claims per 100,000 workers reported in the neighboring states of North Carolina and Georgia.
The state has also seen an increase in medical costs, which increased by 6.1 percent in 2008 and 12.7 percent in 2009. The state’s average medical claim is now costing roughly $30,000 per claim.
The same upward pressure can be seen in wage loss benefits. After increasing by 2.6 percent and 3.2 percent in 2008 and 2009, respectively, the state’s average indemnity claim cost is running over $33,000.
While costs are increasing, the number of dollars in the workers’ compensation system has dropped sharply downward. After reaching a high of $793 million in 2007, the state’s overall premium base dropped to $533 in 2010. Most of that decrease is attributable to the recession and the fact the South Carolina’s jobless rate has run higher than the national average. In the construction industry alone, the state has lost 35.7 percent of its workforce.
According the state Department of Insurance 2010 market share report, the state’s largest workers’ compensation insurers include Bridgefield Casualty Insurance Co., with $24.8 million in premiums, Hartford Insurance Co. of the Midwest with $21.7 million, and Accident Fund Insurance Co. of America with $18.9 million.