NCCI Predicts Rate Increase for Construction Industry
Posted by Dan Phelan on Mon, Oct 25, 2010 @ 09:18 AM
Read the full NCCI Report Here
Last month NCCI (National Council on Compensation Insurance) released a report that stated while claim frequency is down, indemnity (time out of work) and severity (cost of medical treatment) are both up. This trend of claim frequency has been headed in a positive direction since 1991 due in large part to companies taking loss control and claim prevention seriously, as well as many factories and manufacturing plants adding increase automation in lieu of human workers for dangerous jobs. There has also been a marked decrease in industries like construction and manufacturing since the "recession" began in 2008. Less people working=less injuries. However, the double-edged sword to this report are that the injuries that are still occurring have become more severe. Due to the severity of some of these injuries, insurance carriers are still paying out substantial medical dollars and indemnity payments to out of work employees.
What does this mean for Connecticut construction companies? Simply, you can expect your workers compensation insurance premium to increase in 2011 through no real fault of your own. Because of the losses from your peers in your industry, your MOD may decrease up a few points on 1/1/2011. If you haven't heard from your agent what they've projected your MOD to be next year, now would be a good time to check. Especially if you're a contractor that needs a sub 1.00 MOD to bid projects. In situations like this, having an experience MOD under 1.00 is good, but not great because of its susceptibility to go over 1.00 when NCCI adjusts its rating formula. Having MODs drop a few points can be helpful if you're hovering around 1.00, but the double edged sword to this is that with the rate increase, it could cancel out the potential premium decrease from your MOD dropping.
What would be great is if you had already partnered with an insurance broker that helps contractors develop strategies to achieve their minimum mod. Not only will you not have to worry about bidding jobs, but you will also get to enjoy best in class pricing for your workers compensation insurance and have your account be looked upon favorably when it slides across the desk of an insurance company underwriter. A couple of other bonuses for contractors that maintain a MOD below 1.00 is that they can apply for the Connecticut Contractor Credit on their workers comp insurance (less premium!) as well as receiving a credit for having a "credit MOD". As a caveat, these credits aren't available from every insurance carrier (some carriers can provide cheap quotes without using credits because they don't actually understand how construction insuranace works).
So to sum it up:
Losses are down, but the cost per claim is up.
Because claim costs are up, NCCI is going to have to adjust their calculations. Early predictions is a rise in MODS for all experience mod rated companies.
Talk to you agent about your mod. Find out what they predict it will be in 2011. If it's going to be around .97-1.00, try to put a plan in place ASAP to lower reserves and close claims.
Tomorrow in Hartford, there will be a public hearing explaining the change in NCCI's rating. Details here
