Flash Report: Bureau: 2021 Workers’ Comp Rate Increase

The Workers’ Compensation Insurance Rating Bureau’s governing committee members approved a filing that will boost 2021 pure premium advisory rates by 2.6%. The filing would have been a 1.3% decrease but for the Bureau’s new COVID surcharge. It is 4.6% higher than the public’s actuary recommended.

The increase, against a backdrop of record profits for workers’ comp, was pushed through by the insurance industry majority on the committee and opposed by employers representees. The Bureau is a private organization with quasi-governmental responsibility. It is financially supported exclusively by insurance carriers in whose interests it operates.

The insurance carrier majority on the committee ganged up to reject a motion from the public representatives to approve the methodology recommended by their actuary, which would have produced a 2% decrease. Instead, the industry majority approved its own motion to accept the 2.6% rate increase recommended by staff.

Differing COVID Surcharges Based Upon Class Codes

However, the final impact on employers will vary greatly as the Bureau plans to allocate the expected COVID-19 costs by weight across the industry. Note that even low exposure classes will be surcharged.

The Bureau is looking to apply the surcharge on a weighted basis according to an industry’s share of the emerging COVID-19 costs. It is initially looking at a high / medium / low weighting that would apply a 12-cent charge to classes in the health care and agricultural sectors and a 4-cent surcharge to lower-rated classes (see chart). Classes in the middle would get the overall average adjustment of 6 cents per $100 of payroll.

Committee members expressed concern about the oversized impact the adjustment would have on low exposure classes such as 8859, which would see a 67% increase ONLY due to the surcharge. Many of these classes have limited exposure to the virus, and much of their workforce is working from home. Bureau staff committed reevaluating the weighting to apply the costs to the sectors where they are being generated more accurately. They said that it would be part of the filing and also on the agenda in September.

Bureau staff committed reevaluating the weights to more accurately apply the costs to the sectors where they are being generated. Additionally, it is planning to reexamine the COVID-19 related values and allocation of those costs in September when it has an additional month or two of data.

The projects COVID-19 costs amount to 3.8% of the projected loss and loss adjustment expenses for the system. The math works out to an additional 6 cents per $100 of payroll to the average rate overall, although the increase will be allocated based on relative exposure to the virus.

SectorDescriptionRecommended Category
62Health Care and Social AssistanceHigh
11Agriculture, Forestry, Fish and HuntingHigh
72Accommodation and Food ServicesMedium
48Transportation and WarehousingMedium
44Retail TradeMedium
92Public AdministrationMedium
22UtilitiesMedium
81Other Services (except Public Admin)Medium
61Educational ServicesMedium
56Admin Support and Waste Management and Remediation ServicesMedium
31ManufacturingMedium
23ConstructionMedium
42Wholesale TradeMedium
21Mining, Quarrying, and Oil and Gas ExtractionMedium
53Real Estate and Rental and LeasingLow
71Arts, Entertainment, and RecreationLow
52Finance and InsuranceLow
54Professional, Scientific and Technical ServicesLow
51InformationLow
55Management of Companies and EnterprisesLow