Sep 16, 2020

NCCI 2021 WC loss cost decrease of 1.8% approved

The New Hampshire Insurance Department approved the original workers’ compensation voluntary loss cost filing made by the National Council on Compensation Insurance, consisting of an overall 1.8% decrease. Additionally, a decrease of 0.6% of the overall assigned risk rates was approved as filed. These loss costs and rates will take effect Friday, Jan. 1, 2021. For more on the NHID approval, see the online bulletin.

NCCI made the following key observations that impact loss costs and rates in New Hampshire:

• The overall loss cost level change in this filing is based on premium and loss experience for policy years 2016, 2017 and 2018, evaluated as of December 31, 2019. This data does not reflect any effects of the COVID-19 pandemic.
• Generally, New Hampshire’s lost-time claim frequency has declined, and the decline has moderated in recent policy years.
• After adjusting to a common wage level, indemnity average cost per case remains relatively flat while medical average cost per case has decreased in the latest two policy years.

Rating components

Components of the -1.8% loss cost reduction include changes in: 1. experience at -2.0%; 2. trend at -0 7%; 3. benefits at 0%; and 4. loss-based expenses at +0.9%. Also, the overall voluntary loss cost change can be broken down by industry sector as follows: manufacturing (-3.2%); contracting (-3.1%); office and clerical (-1.4%); goods and services (-2.1%); and miscellaneous (+1.2%). Keep in mind that the changes in loss costs and rates for individual classifications may vary significantly. These are available to members by accessing QS28025—2021 New Hampshire voluntary workers’ compensation loss costs and residual-market rates in PIANH’s QuickSource library.

Terrorism/Catastrophe

The terrorism loss cost remains at .005 and the terrorism assigned risk rate remains at .01. The catastrophe (other than Certified Acts of Terrorism) loss cost and assigned risk rate also remains at .01.

Maximum/minimum payroll

You will notice that the maximum payroll for executive officers and limited liability company members will increase from $4,300 to $4,500, but the minimum payroll will remain at $550. The maximum payroll for executive officers of an unincorporated association will remain at $2,200, and the minimum payroll will remain at $275. Also, the premium basis for a sole proprietor and partners will increase from $28,200 to $29,200.

Split point

2015 was the third and final year of the split point transition period for experience rating. In each subsequent loss cost filing, the split point will be indexed by the countrywide severity change. For 2021, the split point will increase from $17,500 to $18,000.

Loss cost multipliers

In order to convert voluntary lost costs to rates, the insurer’s loss cost multiplier must be applied. These LCMs are filed with the NHID and are changed periodically by individual insurers. However, these changes do not need to coincide with the loss costs approved for Friday, Jan. 1, 2021. The current list of insurer LCMs is located here.

Assigned risk plan

The 2021 assigned risk loss cost multiplier will increase to 1.563 from the 2020 multiplier of 1.545. Insurers having an approved LCM higher than the plan must advise policyholders that a lower premium is available in the plan. Market share in the plan has increased to 10.8% in policy year2018.

The expense constant will remain at $160 and the maximum minimum premium of $1,000 will not change. Also, the flat differential, which reflects the general experience of risks in this market, will remain at 25%.—Corbin