Nov 16, 2017

NCCI 2018 WC loss-cost decrease of 14.1 percent 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 14.1 percent decrease. Also approved is an overall assigned risk-rate decrease of 12.6 percent. These loss costs and rates will take effect Monday, Jan. 1, 2018. 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.
• Claim frequency continues its downward trend.
• Medical cost per lost-time claim has moderated.

Key components

Components of the 14.1 percent reduction in the overall loss cost level include changes in: experience at -11.1 percent; trend at -3.5 percent; benefits at +0.2 percent; and loss-based expenses at -0.1 percent.

Terrorism/catastrophe loss

The terrorism voluntary loss cost increases from $0.01 to $0.025 and the assigned risk terrorism rate increases from $0.02 to $0.03. There is no change in the catastrophe charge of $0.01.

Distribution

The 14.1 percent reduction in the overall loss cost level is broken down by industry sector as follows: manufacturing (-14.7 percent); contracting (-12.9 percent); office and clerical (-17.0 percent); goods and services (-12.5 percent); and miscellaneous (-16.4 percent). Keep in mind that, depending on the industry sector, loss costs for an individual classification could increase as much as 7 percent and decrease as much as 37 percent.

Maximum/minimum payroll

The maximum payroll for executive officers or members of limited-liability companies remains at $2,600 and the minimum payroll remains at $1,300. The premium basis for a sole proprietor and partners increases from $67,200 to $68,300.

Split point

2015 was the third and final year of the split-point transition period for experience rating, bringing it to $15,500. In each subsequent loss-cost filing, the split point will be indexed by the countrywide severity change. For 2018, the split point remains at $16,500.

Residual market

The flat differential (a reflection of the general experience of risks in this market) remains at 30 percent. There is no change in the Assigned Risk Adjustment Program (surcharges on actual claims), the expense constant of $160 and the maximum minimum premium of $1,500.

Loss-cost multipliers

To convert voluntary lost 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 Monday, Jan. 1, 2018.