Workers' Compensation Pure Premium Rate Increase

What it means for you, our customer

Contacts

SVP, Sales and Marketing
+1 763 746 8271
March 18, 2019Minnesota

Effective January 1, 2019, workers’ compensation pure premium rates in Minnesota increased by two percent. It is the first year, over the past five years, where we have seen an overall increase.

Here is a sample comparison of some basic job classifications:

Classification Name

Code

2015

2016

2017

2018

2019

2015-2019 ∆ %

Auto Sales/Service

8380

$2.09

$2.18

$2.11

$2.06

$2.03

3%

Clerical Office

8810

.28

.28

.22

.21

.19

32%

Sales person

8742

.11

.11

.08

.07

.07

36%

Foundries – Ferrous

3081

5.43

4.92

3.89

3.75

3.47

36%

Foundries – Nonferrous

3085

2.86

3.62

3.39

2.93

3.29

+15%

Machine Shop

3632

2.55

2.65

2.30

2.21

2.42

5%

Precision Parts Manf.

3629

1.37

1.39

1.01

1.03

1.17

14%

Contractor Exec. Supr.

5606

1.03

.96

.89

.83

.83

19%

Stores: Wholesale

8018

2.89

2.95

2.55

2.17

2.26

22%

Stores: Retail

8017

1.12

1.02

.95

.90

.94

16%

What are Pure Premium Rates?

  • Pure premium rates account for the losses an insurer can expect to pay for adjusting and settling workers’ compensation claims.
  • Pure premium rates do not account for administrative and other overhead costs of insurers.

Typically, insurance carriers will not pass through the full reduction in rates, but most likely will pass through the rate of increase.

  • On average, Minnesota mono-line workers’ comp carriers have a 2018 combined ratio of 91 to 99 percent. A ratio below 100 percent means the company is making underwriting profit.
  • Investment profit on their surplus is estimated at 3.5 to 4 percent.

What a Pure Premium Decrease means for you

With a substantial decrease in pure premium rates, expected losses will decrease,  but actual losses typically stay the same resulting in a negative effect on your experience modification factor, leading to increase premiums in future years.

As e-mods increase and Pure Premium Rates (PPR) start to again increase, businesses can start to see rate and pricing increases. Align these changes with economic growth and potential health care inflation and workers’ compensation can become a bigger cost than budgeted and anticipated.

The effects of the three-year timeframe can be painful if you aren’t maintaining focus on loss prevention efforts.

We are also starting to see an increased frequency of losses that tends to also lead to an increase in severity.

What we can do together to improve or maintain your pricing structure long term

Build a plan

At MMA, we work with only the most reputable insurance carriers to ensure the highest level of service and positive outcomes for you.

We have the experience and expertise to help you manage these rate changes and the effects on your experience modifier.

  1. Reduce your experience mod by reducing your losses
    • Have good hiring practices. Hire the right people for the job. Train them for specific job tasks.
    • Create a safe environment. Prevent losses.
    • Reduce injury costs with early return-to-work practices.
    • Check the calculations on your e-mod worksheet. Mistakes can occur. Need a copy? Get your e-mod worksheet through your MMA representative or directly from the rating bureau.

  2. Review your experience mod analysis. Plan for the future.
    • Our analysis will show premium costs of each workers’ comp claim and forecast for e-mod changes. Understand the potential premium savings achieved by decreasing your e-mod.
    • We will share strategies on ways to improve your e-mod and lower costs.
    • We understand your operations, the current market issues, carrier options and ultimately what you need to develop a solid, cost-beneficial plan.