Colorado businesses will see a large reduction in “loss costs” associated with workers’ compensation premiums in 2018, according to the Colorado Division of Insurance (DOI), part of the Department of Regulatory Agencies (DORA).
The department recently approved a large reduction of 12.7 percent for the average “loss costs”. While this will be the fourth consecutive year without an increase, and this particular component has been dropping since 2014, it is a significant difference from the 2017 decrease of 2.4 percent.
Loss costs are the average cost of lost wages and medical payments of workers injured during the course of their employment. Factors that may increase workers’ compensation costs include: frequency, duration of claim, number of treatments for each claim, severity of injury, increasing medical costs and overall costs to cover workers’ compensation claims.
This decrease is attributed to a number of items. The claims experience – what is paid out in claims – is the biggest driver in bringing down loss costs. And driving down the claims experience is a reduction in the number of claims being filed, going from 25 claims per million in 2001 to 17.8 claims per million in 2015.
The work of employers and their workers also continues to be a force in reducing workers’ compensation costs. More and more employers with workers compensation insurance are providing appropriate and ongoing safety training. Many also provide strong return-to-work programs, which bring employees back into the work environment sooner, and wellness programs, which can lead to healthier employees in general.
“This is good news for employers in Colorado,” said Colorado Insurance Commissioner Marguerite Salazar. “But this is also good news for employees too. It means that workplace accidents are going down, and when they occur, they are less serious and mean less time off work.”
Even with the statewide average loss costs decreasing 12.7 percent, individual employers may see variation in their workers’ compensation premium, either increases or decreases, based on their particular classification code or industry group.
The National Council on Compensation Insurance (NCCI), a rating and advisory organization, collects annual data on workers compensation claims for the insurance industry, and publishes loss costs that form the basis for all workers compensation premium determinations. All insurers in Colorado use the NCCI loss costs as a base. Each insurer’s own expenses are added to the NCCI’s loss costs to arrive at the rates charged to employers. This is another aspect of why each employer’s specific rate change may differ from the -12.7 percent change.
The projected loss cost figures for 2018 were submitted by NCCI to the DOI earlier this year. Independent actuarial consultants were contracted to provide a review of the analysis for all of the industry classes in Colorado. The NCCI filing, the actuarial analysis and any public comments are used by the Commissioner of Insurance to establish the loss costs used for the premium rates for the upcoming year.
To view the NCCI loss cost filing, individual classification codes, reports, and the final order of approval from the Commissioner of Insurance, visit the Division’s Workers’ Compensation page.
Source: Colorado Department of Insurance
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