South Carolina Regulators Approve 9.8% Cut in Workers’ Comp Rates
The South Carolina Department of Insurance has approved a filing that lowers workers' compensation insurance rates for employers by an average 9.8% -- the second year a decrease has been approved.
The state is seeing a trend toward more private insurance coverage. In 2008, the Assigned Risk Plan, South Carolina's residual market mechanism, accounted for about 3.9% of the direct written premium for workers' compensation in the state -- a drop from 7.7% in the previous year, the department said in a statement.
The reasons behind this include an increase in employer safety programs, a decrease in claim frequency and changes in the severity of claims, Insurance Director Scott Richardson said in a statement.
Attempts to reach Richardson for additional comment were unsuccessful.
Medical services account for some 42% of the total benefit costs incurred in workers' compensation systems -- a major change from two years ago, he said. Indemnity payments, or wage replacement costs, now account for the majority of workers' compensation costs. The main reason is the change in the hospital fee schedule that was implemented in October 2006, according to Richardson.
Richardson said rates should remain stable due to reforms enacted in 2007 that addressed administrative issues often cited as cost drivers. Among the changes was the elimination of the Second Injury Fund by 2013.
"We believe these reforms will help stabilize the rates in this market," said Richardson. "We will continue to monitor this trend and assess the impact these reforms have on workers' compensation rates in South Carolina as it will take several years to realize the full impact."
In 2007, South Carolina Gov. Mark Sanford signed an executive order requiring that members of the state's Workers' Compensation Commission use the American Medical Association guidelines in determining awards. The provision had been dropped by legislators from a workers' compensation reform bill, S.332, that was approved in the legislative session that ended in June. Sanford cited wildly varied workers' compensation rulings as driving up business costs in the state (BestWire, Sept. 21, 2007).
Michelle Baurkot, an assistant vice president at A.M. Best Co., said during a recent A.M. Best Co. webcast, "State Run Workers Compensation Funds, Their Role in the Competitive Marketplace" that premium levels in the workers' compensation marketplace have plummeted in the past two and a half years, influenced by "reduced pricing and ongoing competition. In the last 18 months or so, what's really driving more of that is the economy. We're seeing overall lower payrolls and decreased exposures. This is particularly evidenced in areas such as manufacturing, construction, where there have been a lot of layoffs or reduced opportunities."
The top five writers of workers' compensation in South Carolina based on 2009 direct premiums written were Liberty Mutual Insurance Cos., with 16.1% market share; Hartford Insurance Group, with 10.3%; American International Group Inc., with 7.1%; W.R. Berkley Group, with 6.5%; and Travelers Group, with 5.6%, according to BestLink, which provides online access to A.M. Best's Global Insurance & Banking Database.
(By Caroline Saucer, editor, BestWeek: [email protected])
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