Many employers will pay higher workers’ compensation insurance premiums in 2011. The state Department of Insurance has approved an overall increase of 5.8% for policies purchased in the normal or voluntary market and an increase of 7% for assigned risk policies.

Costs for self-insured companies will likely increase as well, since their costs generally mirror those for insured businesses. The rate changes were proposed by the National Council on Compensation Insurance, Inc., (NCCI), which analyzes and recommends workers’ comp rates for insurers in more than 40 states.

The new rates are “pure premium” rates, which do not include costs associated with administration, premium taxes, and other expenses—nor do they take companies’ claims experience into consideration. Rates will take effect for policies as they are purchased or renewed on or after Jan.1, 2011.

What’s Behind the Increases?

“We’re seeing an increase in wage-replacement costs in all of the states,” says Laura Backus Hall, CPCU, State Relations Executive at NCCI.

Wage-replacement and medical coverage are the two components of the workers’ compensation benefit. She explains that one of the reasons for the increase in wage-replacement costs is Connecticut’s aging workforce. (According to a report by the Connecticut Commission on Aging, our state has the nation’s seventh oldest workforce.)

“Typically, wage replacement benefits for an injured older worker are higher because [those workers] are more experienced and they’re making more money,” says Hall.

Another factor in this year’s overall rate increases are rising medical costs and the fact that the decline in claims frequency we’ve seen over the past several years is slowing. Previously, that decline has helped to offset the effect of rising wage-replacement and medical costs.

While there is an overall 5.8% increase in the voluntary market, it doesn’t necessarily mean any one company’s premium is going to go up. It will depend on an employer’s claims experience. Here’s how the new rates break down by industry for the voluntary market:

  • Manufacturing     +6.1%
  • Contracting         +4.4%
  • Office & Clerical  +0.1%
  • Goods & Services +7.1%
  • Miscellaneous     +10.6%
  • Overall              +5.8%

(A breakdown for the assigned risk market was not yet available .)

-- Kia Murrell

Kia Murrell is an assistant counsel at CBIA. She may be reached at 860.244.1931 or kia.murrell@cbia.com.