Insurance News

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December 15, 2010

Missouri Insurance Department calls for double-digit drop in 2011 workers' comp rates

Jefferson City, Mo. - After reviewing statewide data for insurance claims paid by employers for injured workers in 2010, the Missouri Department of Insurance is recommending a decrease in workers' compensation rates for 2011. The department recommends insurers selling workers' comp decrease their loss costs by 11.1 percent. Loss costs are a prediction of how much an insurer will pay in claims in the coming year.

Each year, the National Council on Compensation Insurance files loss costs with the Department of Insurance for its review. These numbers predict how much insurance companies will pay in claims in the coming year, and insurers use them to set their rates. Loss costs generally reflect the average cost of lost wages and medical payments of workers injured on the job. The Council is an industry-funded group, paid by workers' comp insurers to provide actuarial analysis.

After reviewing the National Council's estimates, the department makes its own recommendation for loss costs. Under Missouri law, insurers must set their rates based either on the recommendations of the National Council, the department or their own actuarial analysis.

Effective Jan. 1, 2011, the National Council proposes an overall decrease of ­­­­4.4 percent from its 2010 loss costs. The department proposes the larger decrease of 11.1 percent. This marks the fifth consecutive year the NCCI and the department have recommended loss-cost decreases.

If insurers use our recommended number, Missouri employers could save as much as $80 million in the workers' comp premiums they pay in 2011, said Insurance Director John M. Huff. This is an aggressive recommendation, but our research shows that insurers can afford to make this change and remain profitable.

Huff says the workers' compensation insurance market is increasingly competitive in Missouri, with 37 new insurers entering the market in the past two years. In Missouri, 263 companies are actively writing workers' comp policies. Huff says competitive prices are largely due to continued improvements in workplace safety, resulting in fewer workers' compensation claims. The frequency of on-the-job injuries is down more than 50 percent over the past 15 years.

The NCCI's proposed change in loss costs by industry group is shown below:

 NCCI 1/1/2011 advisory loss costs

Industry group

Largest
de
crease

Largest
increase

Average
change

Manufacturing

-24%

+16%

-3.9%

Goods & services

-22%

+16%

-2.2%

Contracting

-26%

+14%

-6.3%

Office & clerical

-28%

+12%

-7.7%

Miscellaneous

-24%

+16%

-3.9%

Total

-28%

+18%

-4.4%


The department's decrease of 6.7 additional percentage points beyond the National Council's recommendation is based on the following differences:

Indemnity and medical trend                                                -2.0 %

Premium and loss development                                             -2.7 %

Use of voluntary market data                                                -1.9 %

Claim expense costs                                                             -0.1 %

Total recommended change to
NCCI's proposed 2011 loss costs                                         -6.7 %


Workers' compensation claims are regulated by the Division of Workers' Compensation in the Missouri Department of Labor and Industrial Relations, and rates are reviewed by the state Department of Insurance.

The DIFP's independent review of loss-cost data is available on the department's website.

About the Missouri Department of Insurance, Financial Institutions & Professional Registration

The Missouri Department of Insurance, Financial Institutions and Professional Registration (DIFP) is responsible for consumer protection through the regulation of financial industries and professionals. The department's seven divisions work to enforce state regulations both efficiently and effectively while encouraging a competitive environment for industries and professions to ensure consumers have access to quality products.

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