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South Carolina Notifies Insurers of Workers’ Comp Loss Cost Updates, Filing Requirements
South Carolina has alerted insurers of several changes to loss costs for the state’s voluntary and assigned risk workers’ compensation markets, and has issued a requirement that updated loss cost multipliers be filed in response to the recent termination of the state’s injury fund assessment.
Thanks to a revision by the National Council on Compensation Insurance (NCCI), workers’ compensation loss costs in the state’s voluntary market will decrease by an average of 7 percent, according to a corrective action order from the South Carolina Department of Insurance.
The order, dated Jan. 26, says NCCI filed an overall revision of -7 percent for loss costs with an effective date of April 1, 2018. The changes in loss costs vary depending on the following industry groups:
Industry Group Average Maximum Increase Maximum Decrease
Manufacturing – 6.1 % + 19 % – 31 %
Office & Clerical – 11.8 % + 13 % – 37 %
Goods & Services – 6.1 % + 19 % – 31 %
Contracting – 6.4 % + 19 % – 31 %
Miscellaneous – 7.9 % + 17 % – 33 %
End of SIF Assessment, Require Loss Cost Multiplier Update
Insurers in South Carolina are also no longer required to include an assessment for the South Carolina Second Injury Fund (SIF) in their loss cost multipliers (LCMs). The SCDOI said Jan. 30 that the SIF assessments were effectively terminated in 2017 in accordance with the state’s 2007 workers’ comp reforms that enacted a transition plan beginning in 2013 to close out the SIF.
The final of five planned SIF assessments was issued in 2017 and the State Fiscal Accountability Authority said the most recent analysis by the state’s audit firm KPMG indicated no additional need for assessments, the department said. The next analysis by KPMG is planned for 2019 and SCDOI said no further assessments are anticipated before that time.
As such, SCDOI said in its notice that workers’ compensation insurers are required to file an update to their loss cost multipliers (LCMs) by April 1, 2018 to “ensure that rates charged for workers’ compensation insurance are not excessive.”
The updated LCMs must take effect no later than Aug. 1, 2018 and are required so that rates may be adjusted to properly reflect the reduction in costs brought about by the cessation of the SIF, the SCDOI said in a statement. All insurers’ LCMs must be filed in 2018, even if their current LCMs do not include a SIF assessment provision.
The elimination of the assessment was somewhat anticipated. SCDOI said in its 2016 workers’ compensation report that additional analysis would determine whether an assessment would continue after 2017, and SCDOI was hopeful that SIF assessments would no longer be an issue or a component of loss cost multiplier filings “in the near future.”
As a result of 2016 legislation passed by the South Carolina Legislature, insurers doing business in the state must now file to adopt approved NCCI loss costs. The reforms, the first to the state’s workers’ compensation system since 2007, made it a legal requirement for workers’ comp insurers to file loss cost adoptions or loss costs multipliers with the SCDOI. Insurers’ must submit their rate filing within 60 days of the approval date of the new loss costs in accordance with the new law.
Insurers must also now implement the latest NCCI loss costs within 120 days from the new loss cost effective date. SCDOI said in its 2016 workers’ compensation report that the new law, which amends the 1976 Code of Laws of South Carolina relating to rate filing requirements, was in response to concerns raised by SCDOI that the use of older, outdated loss costs was inappropriate.
State Assigned Risk Plan Changes
The SCDOI issued an additional corrective action order increasing the overall average assigned risk rate level for state’s residual market, the Assigned Risk Plan. In another order dated Jan. 24, 2018, SCDOI Director Raymond Farmer said the Assigned Risk Plan Administrator NCCI alerted the department in October that “excessive losses are indicated for the assigned risk plan and are jeopardizing the ability of the plan to operate as a self-funded mechanism.”
SCDOI’s actuary reviewed the notice from NCCI and other supporting data and recommended revised rates and rating values for the assigned risk market.
To correct the assigned risk plan rate inadequacy and “ensure that the assigned risk plan is self-funded and self-sustaining…” Farmer ordered that for the industrial classification codes, a loss cost multiplier of 2.578 be applied to the South Carolina voluntary market loss costs effective April 1, 2018, the minimum premium multiplier shall be increased from 185 to 200, and the maximum minimum premium shall be increased from $1,250 to $1,500.
SCDOI said based on the most recently available distribution of payroll by class code, the change in the assigned risk loss cost multiplier, and the voluntary market lost cost level changes effective April 1, the assigned risk average level is estimated to increase by an average of 9.7 percent. SCDOI said the increases in both minimum premium multiplier and the maximum minimum premium will result in “premium increase for some smaller policies with minimal or no payroll.”
The changes to the Assigned Risk Rates by industry group are as follows:
Industry Group Average Maximum Increase Maximum Decrease
Manufacturing + 10.8 % + 41 % – 19 %
Office & Clerical + 4.0 % + 34 % – 26 %
Goods & Services + 10.8 % + 41 % – 19 %
Contracting + 10.4 % + 41 % – 19 %
Miscellaneous + 8.6 % + 39 % – 21 %
Any insured or party affected by the insurance loss cost increase may request in writing by Feb. 9 a public hearing before the Administrative Law Court.
About Amy O’Connor
O’Connor is the Southeast editor for Insurance Journal and associate editor of MyNewMarkets.com. More from Amy O’Connor