Industry, state seek drop in Workers Comp costs

Suntimesnews.com

JEFFERSON CITY -- State regulators and the insurance industry's principal trade group have called for a reduction in Missouri workers compensation insurance rates, providing financial relief for the state's business community, Gov. Bob Holden recently announced. The announcement follows an 18 percent reduction in workplace injuries over a two-year period.

The National Council on Compensation Insurers (NCCI) -- the private trade group -- is advising companies that costs underlying workers compensation rates should drop an average of 1.4 percent in 2004.

Based on a consulting actuary's recommendation, the Missouri Department of Insurance's (MDI) projects that companies could reduce rates up to 11.1 percent from current levels and still cover expenses and reasonable profit.

"Management and employees continue to reduce injuries, allowing workers compensation costs to fall despite rising medical costs to treat injured workers," Holden said. "We have the best of both worlds when businesses control insurance costs by preventing injuries."

Scott Lakin, MDI's director, said his agency's analysis indicates claims frequency has been falling 5.9 percent a year in Missouri since 1993 while the cost of claims, driven largely by medical expenses, has been rising at 2.3 percent annually. Compared to the eight surrounding states, Missouri has the second lowest claim frequency.

According to the Missouri Division of Workers Compensation, workplace injury reports dropped from 174,726 in fiscal 2001 to 144,025 in 2003, or almost 18 percent.

NCCI anticipates that average claim and adjustment costs for workers compensation coverage statewide will drop from $2 to $1.97 for every $100 of payroll in 2004. MDI projects a reduction to $1.78. Insurers then add administrative expenses and profit margins for the final rate.

The NCCI also recommended average costs for industry sectors in 2004, including reductions of 2.3 percent for manufacturing; 3.7 percent for goods and services; 0.8 percent for contracting; and 2.1 percent for miscellaneous workers. Office and clerical workers' underlying costs would increase by 5.2 percent.

Individual companies' rate change will differ from the average, based on their company's ratemaking practices, their own claims histories and the statewide experience for employees similar to their workforces.

The return to stable or declining workers compensation rates in Missouri was signaled last spring when rates were cut an average 0.4 percent for 5,400 businesses in the state "pool," which provides coverage when firms cannot find regular commercial policies. Travelers Commercial Casualty Co., which administers the pool, requested that rate cut, which MDI approved.

Missouri law allows the NCCI and MDI to advise companies on the underlying "loss costs" so they can set rates.