Nov 2, 2020
NCCI 2021 WC loss cost decrease of 1.8% approved
The Connecticut Insurance Department approved the proposed workers’ compensation loss cost filing made by the National Council on Compensation Insurance, consisting of an overall 1.8% decrease. Also approved is an overall assigned risk rate decrease of 1.4%. These loss costs and rates will take effect Friday, Jan. 1, 2021. For more on the CID approval, see its online Memorandum and Order.
In support of the filing, NCCI made the following key observations:
- Loss experience improved in the latest policy year (2017-2018).
- Lost time claim frequency continues its downward trend over the last 8 years.
- Indemnity and medical costs per claim has declined over the same 8 years.
Key Components. Components of the 1.8% reduction in the overall loss cost level include changes in: 1. experience at -3.8%; 2. trend at +0.9%; 3. benefits at +0.4%; and 4. loss-based expenses at +0.7%.
Terrorism/Cat Loss. The terrorism voluntary loss cost remains at $.025 and the assigned risk terrorism rate remains at $.03. There is no change in the catastrophe charge of $.01.
Distribution. The 1.8% reduction in the overall loss cost level is broken down by industry sector as follows: manufacturing (+0.4%); contracting (-2.4%); office and clerical (-1.9%); goods and services (-2.4%); and miscellaneous (-2.0%). Keep in mind that, depending on the industry sector, loss costs for an individual classification could increase or decrease in significantly different amounts. For individual voluntary loss costs and assigned risk rates, see PIA QuickSource document No. 06124.
Maximum/minimum payroll. The maximum payroll for executive officers or members of limited liability companies remains at $2,700 and the minimum payroll remains at $1,350. The premium basis for a sole proprietor and partners, however, increases from $69,100 to $71,400.
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 increases from $17,500 to $18,000.
Residual market. The flat differential (a reflection of the general experience of risks in this market) remains at 30%. There is no change in the Assigned Risk Adjustment Program (25% maximum – weighted for severity), the expense constant of $160 and the maximum minimum premium of $1,500.
Loss cost multipliers. In order to convert voluntary loss costs to rates, the insurer’s loss cost multiplier must be applied. These LCMs are filed with the CID and are changed periodically by individual insurers. However, these changes need not coincide with the loss costs approved Friday, Jan. 1, 2021.—Corbin