The Delaware Compensation Rating Bureau (DCRB) proposed a reduction in rates of 9.9 percent for the voluntary market. However, when Delaware’s Ratepayer Advocate and the Department of Insurance reviewed the proposals, they increased the reduction slightly. For the voluntary market, rates will be reduced by an average of 10 percent.
For the residual market, the reduction will average 7.29 percent. The residual market—sometimes known as an assigned risk market—serves employers who are unable to secure workers’ compensation coverage from the voluntary market.
The reductions were approved on October 15. “The decreases… are slightly greater than the original filing,” stated a press release by the Insurance Department. “It is important to keep in mind that these are average changes, and actual changes to a particular policy may vary depending on, among other things, class codes or insureds.”
The decreases in Delaware follow a national trend in the reduction of workers’ compensation insurance premiums. Earlier this month, I reported on Florida’s proposed 13.4 percent reduction in their insurance rates. Explaining their recommendation, the National Council on Compensation Insurance (NCCI) said that there has been a long-term reduction in the frequency of claims. “Constant improvement in loss experience is the primary driver,” stated the NCCI in a statement.
“I am delighted to approve yet another decrease in workers’ compensation rates in Delaware,” said state Insurance Commissioner Trinidad Navarro, “and even happier to see a double-digit average decrease in the voluntary market.”
The reductions will be welcomed by businesses across Delaware because workers’ compensation premiums represents a significant expense for employers. In Delaware, any company with at least one employee is required to have workers’ compensation insurance. Employers may not pass on the costs of insurance onto employees. Sole proprietors and farm workers are not required to have coverage, although they can elect to be covered.
Facing the pressure of high business costs, employers across the country have been found attempting to avoid paying workers’ compensation premiums, either by misrepresenting their employee headcount or by misclassifying workers.
Even with the reduction in premiums, Delaware will still be among the most expensive worker’s compensation insurance markets in the country. According to a study by the State of Oregon, Delaware’s premium rate index is currently $2.50 per $100 of payroll. The country’s lowest premium rates are found in North Dakota, where the premium rate index is $0.82; the highest are in New York where the rate index is $3.08. Delaware currently has the fifth highest workers’ compensation insurance premiums nationally. Even with the new reductions, Delaware will still rank around fifth in the nation.
Delaware’s high workers’ compensation premiums coupled with the state’s high health care costs have crippled businesses. Several companies had suggested they are considering relocating to adjacent Maryland to save costs.
In his statement, Navarro suggested the premium reductions were in part in response to these difficulties faced by employers. “For many Delaware businesses, large and small, this year’s decrease means significant saving and is an incentive for smaller businesses to relocate to Delaware and employ more Delawareans,” he said.
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