NCCI Workers Comp Primary/Excess Split Point Changes
Back in July, we discussed in our blog, the state of the Workers Comp market, which has seen rate increases (and will continue to do so as per all industry indicators) as a result of poor underwriting performance, rising medical costs, and other factors. Over the last year, many states have begun to pass legislative reform in the hopes of getting control over Workers Compensation costs, including most recently in California. Reforms in the California State are set to kick in January 2013, with the benefits taking some time to be realized.
We also discussed changes to the primary/excess split point by the National Council on Compensation Insurance (NCCI Holdings), which is set to begin in January 2013 and be implemented over a three-year period. What will this mean? One of the most important factors in the experience modification is primary losses, which are frequency losses – those claims that are currently $5,000 and under. Claim amounts that exceed $5,000 are considered excess losses. Primary losses have a greater impact on the mod than excess losses. As of January 2013, the split point value will change so that the current value for frequency claims of $5,000 will increase to $10,000 for the first year. In 2014, it will then increase to $13,500, and from 2015, the split point value will be $15,000 plus inflation adjustments. Ultimately, more Workers Compensation claims will fall into the primary loss category. According to NCCI, these changes are being implemented as the average cost of a claim tripled since the last split point update occurred two decades ago. NCCI sees this new split point value benefiting those with good ex-mods.
These changes will directly affect the 34 states and the District of Columbia currently using the NCCI’s rating system. The independent rating bureaus of Indiana, Minnesota, New York, North Carolina and Wisconsin have also adopted the change, and other independent bureaus (Massachusetts, Michigan, and Texas) may re-evaluate their split points as well.
Caitlin-Morgan can provide you with markets in securing Workers Compensation for your clients in addition to alternative Comp solutions and risk management to help clients stem losses and control cost drivers. Please give us a call at 877.226.1027.