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Missouri Department of Insurance recommends decrease in workers’ compensation rates for 2015

The Missouri Department of Insurance is recommending a 4.4 percent decrease in workers’ compensation insurance loss costs for 2015. The key driver of the decrease is the favorable loss experience in 2012.

“A decrease in large losses during 2012, a decrease in the overall medical claims cost associated with worker’ compensation claims, and the downward trend in lost-time frequency are the three key factors behind the recommended decrease in workers’ compensation rates,” said Department of Insurance Director John M. Huff. “We will continue to monitor these trends in the coming year. Missouri benefits from a highly competitive market, with more than 300 companies actively writing workers’ compensation policies.

Huff said competitive premiums are largely attributable to continued improvements in workplace safety, resulting in fewer workers’ compensation claims.

Prospective loss costs are intended to cover indemnity and medical payments for injured workers and some of the expenses associated with providing these benefits. Insurers use loss costs to set their workers’ comp rates. Every year, the National Council on Compensation Insurance (NCCI), an industry-funded group, files advisory loss costs with the Department of Insurance. The department reviews the NCCI’s data and methodology and develops its own recommended loss costs. Under Missouri law, insurers may set their rates based on the NCCI’s recommendations, the department’s recommendations, or their own actuarial analysis. Insurers are not required to change their rates in 2015, regardless of the recommendations made.

The NCCI proposes an overall loss cost decrease of 3.7 percent for policies effective Jan. 1, 2015. The department proposes a decrease of 4.4 percent. The difference in recommendations is based on different estimates for claim expenses. The department includes Missouri Employers Mutual in its review, which leads to an increase in estimated Missouri-specific claim expenses.  The department also predicts downward development in the NCCI’s selected ratio of countrywide claim expenses to countrywide losses as a policy year becomes more mature; this leads to a decrease in estimated countrywide claim expenses. The difference in countrywide expenses has a larger impact than the difference in Missouri-specific expenses, and the net effect is a 4.4 percent decrease compared to the NCCI’s recommended 3.7 percent decrease.

The NCCI’s proposed changes in loss costs by industry group are shown below: NCCI Jan. 1, 2015, advisory loss costsIndustry groupLargest decreaseLargest increaseAverage changeManufacturing-24%+16%-4.4%Goods and services-24%+16%-4.3%Contracting-21%+19%-1.3%Office and clerical-27%+13%-7.2%Miscellaneous-22%+18%-2.2%Total-27%+18%-3.7%

The NCCI’s 2015 loss cost filing and the department’s independent actuarial review are available on the department’s website.

About the Missouri Department of Insurance, Financial Institutions & Professional Registration

The Missouri Department of Insurance, Financial Institutions and Professional Registration (DIFP) is responsible for consumer protection through the regulation of financial industries and professionals. The department’s seven divisions work to enforce state regulations both efficiently and effectively while encouraging a competitive environment for industries and professions to ensure consumers have access to quality products.

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