West Virginia employers can look forward to another reduction in their workers' compensation rates after state officials welcomed a National Council on Compensation proposed statewide average 9.1 percent decrease in loss cost rates.
Ever since West Virginia moved from operating a monopolistic state fund in 2006 and privatized its workers' compensation market, loss costs rates have decreased significantly and this year is shaping up to be no exception.
NCCI's latest proposed 9.1 percent decrease would save employers a total of $37 million. The cumulative reduction in loss costs rates since 2006 would equal 40.4 percent for an overall reduction in employers' premiums of $207 million.
Governor Earl Ray Tomblin welcomed the proposed decrease, especially as the state continues to recover from tough economic times.
"We've done a lot in recent years to reduce the cost of doing business in West Virginia and now our businesses are reaping the rewards of both lower taxes and lower workers' compensation insurance premiums," said Tomblin.
NCCI State Relations Executive George Ortiz said the filing is based on 2011-2012 data and reflects a continued improvement in insurers' claims costs and other related costs.
"The improvement is largely attributable to better than anticipated experience for year 2011, but is also impacted by declines in the observed loss development factors between this year's and last year's filings," said Ortiz.
If approved by regulators as expected, the new rates would take effect November 1.
The proposed 9.1 percent rate cut is not the only savings employers will see this year. In July, state regulators dropped the state's regulatory surcharge that is used to administer the workers' compensation system. The half-a-point reduction from 5.5 percent to 5 percent is expected to save employers $2.7 million.
The one potential trouble spot is the state's residual market, which had substantial growth last year. Among other things, the market's policy count increased from 885 in 2010 to 1,325 in 2011. The growth in policies was reflected in the amount of total premiums, which jumped by 41 percent from $7.4 million in 2010 to $10.4 million last year.
NCCI, however, has proposed a 14.3 percent rate reduction, largely because a competitive bid process for servicing insurers resulted in a compensation decrease from 25.42 percent of net premium to 21.21 percent.
"This contributed to the bulk of the 0.8 percent decrease in the assigned risk expense provision," said Ortiz.
The rate reductions come as West Virginia continues its slow recovery from the economic downturn that started in 2008. The downturn is reflected in a sharp drop in the state's premium base from nearly $500 million in 2007 to under $350 million last year.
Among the industries hardest hit has been the construction sector where employment dropped by 14.9 percent. Similarly, the manufacturing sector saw a 14.2 decrease in employment. The one notable industry that posted an increase is the natural resources and mining sector where employment rose by a 11.8 percent increase.
The state's overall employment rate is showing signs of improving, however, and Tomblin said part of the credit goes to the improvement in workers' compensation rates.
"These new rates, and subsequent financial savings for our businesses, are an excellent sign that our state continues to move in the right direction for continued job growth," said Tomblin.
Friedlander Agency Vice President Rick Higginbotham said that it will take time for the state to recover from the rough economy, especially in the construction industry that the agency specializes in providing insurance.
He said, however, that the rate decreases are a bright spot for employers, who are benefiting since the rates are based on their actual loss data. When the state privatized the market in 2006, it had to base its rates on the loss experience of neighboring states, which in some states was higher.
"There has now been sufficient time to show that the rates reflect the true loss experience than before 2006," Higginbotham said. "It's a positive trend for West Virginia."
admin 04 Aug, 2012
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Source: http://www.insurancejournal.com/news/southeast/2012/08/03/258234.htm
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