Rates for workers' compensation insurance are on their way down for the third consecutive year, according to filings with the Missouri Department of Insurance, Financial Institutions and Professional Registration.
In October, DIFP received its annual loss cost filing from the National Council on Compensation Insurance, or NCCI, which estimates a 7.7 percent decrease in loss costs for 2009, following a 10.1 percent drop in 2008.
Each year, NCCI uses information about the cost of compensation claims from previous years, along with estimates of claims for coming years, to present loss costs - the amount needed to pay a workers' comp claim on a given job classification. Insurance companies use that loss cost to set insurance rates for customers.
Debatable drop
Sources agree that rates should go down again this year. How much that drop should be, however, is debatable.
The state insurance department, however, estimates the drop for 2009 should be much higher than the loss cost decline- 16.8 percent - due to different estimates of medical costs and claim frequency.
Missouri Employers Mutual Insurance Co., the state's largest workers' compensation insurer, calculates its own loss costs using in-house and external actuaries, and historically, MEM's cost loss figures haven't matched those from NCCI.
Joyce Underwood, MEM's assistant vice president of underwriting, said her company's premiums are down 20 percent over the last four years, compared to just 12 percent for NCCI numbers in the same period.
"We certainly consider NCCI's loss costs, but we determine our own rates based on our own experience," Underwood said. "The loss cost is basically the base line (for determining premiums) - that's what starts the process, however you determine the loss cost."
Reasons for the drop
Most Missouri insurance industry professionals point to 2005 changes in the state's workers' compensation law as a reason for declining rates.
In 2005, Senate Bill 1 made significant changes to the state system. The most notable was the ruling that the work accident has to be the prevailing factor in the injury, rather than just a "substantial" factor. Payouts also are reduced if a disabled safety feature or drugs or alcohol are involved.
Randall Gammill, commercial insurance consultant with Connell Insurance in Hollister, said those changes have made injured workers and their attorneys less likely to push their claims to the Missouri Department of Labor and Industrial Relations.
"In the last three or four years, a lot of claimants' attorneys are willing to settle for far less because they don't know what the new law would hold," Gammill said. "If you think you're going to lose, you're not even going to push it to a hearing. You'll take what you can get and move on."
MEM's Underwood agrees, though she points more to a reduction in the overall number of claims as the main reason for the declining rates.
"Claim frequency throughout the state and the nation is down, and that has to be the primary driver. Any time you can cut back on claims, it saves money for everybody," Underwood said. "But we also try to be more effective, get more efficient technology, and look for opportunities to save (money) any time we can."
This installment of Springfield Business Journal’s Architects & Engineers Project Report showcases 26 endeavors by area design and engineering professionals.
