Workers' comp rates trending down

Missouri’s employers will see workers’ compensation rates drop for the second consecutive year in 2016.

Pending recommendations from the state insurance office, a 2.4 percent decrease to workers’ comp rates next year was proposed Aug. 31 by the National Council on Compensation Insurance Inc., a Boca Raton, Fla.-based data collection group.

“The overall decrease is really driven by a decrease in claim experience and loss experience,” NCCI State Relations Executive Carla Townsend said.

According to the proposal, the low frequency of claims also is contributing to an eight-year decline in indemnity loss ratios.

An NCCI report filed January 2015 with the state shows Missouri Employers Mutual Insurance Co. as the Show-Me State’s largest worker’s comp premium writer with 20 percent market share in 2013. MEM spokeswoman Jennifer Peck said the insurer has roughly 14,200 policyholders, and the firm compares data from its book of business with NCCI’s findings.

“Sometimes our data tells a little bit of a different story,” Peck said. “Last year, rates started to go down, and we increased still just a little bit last year because while frequency was trending down severity was still an issue. This is the first year that we are seeing a decrease there as well.”

Contributing to the rate decrease is a lower number of overall claims filed in previous years. 

According to the state’s Division of Workers’ Compensation, 13,697 claims were filed in 2014, down 0.4 percent from 13,754 in 2013. Since 2005, the division has recorded a general decrease of 33 percent in the number of claims filed. 

Contracting
Based on NCCI’s recommendation, contracting employers could see the biggest drop in 2016, with rates down 5 percent from 2015. Aside from back-to-back increases in 2013 and 2014, the industry has generally experienced a downward trend since 2009.

“If we see frequency go down, certainly construction is helping to drive that trend,” Peck said, adding roughly 4,700 of MEM’s policyholders are in the construction industry.

She said workplace safety programs are one factor in lowering the number of claims.

“It pays off in the end,” Peck said.

Kenmar Construction Inc. co-owner Kent Smith Jr. said the company has not filed a major claim this year and only one was filed in 2014. He said a combination of training through the Occupational Safety and Health Administration and Kenmar’s workers’ comp carrier, The Builders’ Association, along with proper equipment, pre-employment drug screening and biweekly safety reminders all factor in.

“I think awareness is helping. Part of that is explaining to the employees that this isn’t something that’s magically paid by someone else,” Smith said, estimating the company spends around $60,000 per year to insure 14 employees.

Although a decrease to rates won’t change the Kenmar’s project pricing, whatever money Kenmar can save on workers’ comp next year will go toward upgrading company equipment.

“The last couple years have been improving,” he said. “We’ve saved a little bit on that, a little bit on fuel, and we might be able to get a couple newer trucks.”

Rick Ramsey, owner of Nixa-based Ramsey Building Co, estimates workers’ comp payments for 15 employees costs the company up to $70,000 a year. 

He considers it a payroll cost for on-site workers and invoices the expense to clients. As a result, any savings would be realized by customers.

“For the nonreimbursable employees, such as administrative or management positions, it would definitely keep the company’s overhead down,” Ramsey said. “I don’t see it being enough money that we’ll go out and buy a new company vehicle, but it definitely helps the bottom dollar.”

Manufacturing
In manufacturing, claims have increased the last three years through 2014, but based on NCCI’s proposal, the industry still could experience a decrease in workers’ comp rates of 2.3 percent from 2015.

“It’s companies like us that are probably driving it down,” said Kathy Choate, the environmental health and safety director at SRC Holdings Corp.

The company takes a preventative approach to claim management through CoxHealth Occupational Medicine.

Physicians tour the company’s facilities to learn more about employee duties and make suggestions on improving ergonomics.

Choate said a greater understanding of the job site on the part of doctors also helps get employees quickly back to work, which mitigates company expenses. She said SRC averages two to three minor injuries a year per facility across roughly 1,000 employees and 10 in Missouri. The company has not had a significant claim in the last three years.

Peck said the basics of premium calculation are derived from a company’s payroll multiplied by the costs of an employees’ job classifications multiplied by an experience modification factor. The “E-mod” determines the likelihood an employer will have better or worse losses compared to the industry based on past experience. An E-mod of one is the average, and Choate said SRC’s low frequency and severity have lowered the company’s modifier to 0.58.

“I would rather be preventing them than trying to clean up after them,” Choate said. 

“And if you get in that mindset you will drive the number down.”