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.
|62||Health Care and Social Assistance||High|
|11||Agriculture, Forestry, Fish and Hunting||High|
|72||Accommodation and Food Services||Medium|
|48||Transportation and Warehousing||Medium|
|81||Other Services (except Public Admin)||Medium|
|56||Admin Support and Waste Management and Remediation Services||Medium|
|21||Mining, Quarrying, and Oil and Gas Extraction||Medium|
|53||Real Estate and Rental and Leasing||Low|
|71||Arts, Entertainment, and Recreation||Low|
|52||Finance and Insurance||Low|
|54||Professional, Scientific and Technical Services||Low|
|55||Management of Companies and Enterprises||Low|