Maryland: Decline in claims frequency results in reduction in rates
The board of directors for the state's Injured Workers Insurance Fund recently approved a 6.8 percent overall reduction in base rates. Officials said the move was predicated on an annual rate analysis performed by an independent consulting actuary. According to the IWIF, 27 industries will receive significant rate decreases, which will go into effect Jan. 1.
Officials said the rate reductions were driven largely by a continued decline in claims frequency over the past year. Additionally, the U.S. Bureau of Labor Statistics reported that the injury rate in Maryland for 2007 dropped to 3.7 injury cases per 100 full-time workers -- a decline from 3.8 in 2006 and 4.2 in 2005.
"I am pleased that IWIF is in a strong financial position and can offer many of its customers a rate reduction on their premium," said Tom Phelan, president and CEO of the IWIF. "This rate change will benefit many of our customers as well as strengthen the business economy in the state. Ultimately, however, I am most pleased with the continued decline in the number of injured workers in Maryland."
Phelan said the IWIF's primary driver has been its persistent focus on fostering a safety culture in the workplace. The fund has successfully introduced safety programs, and policyholders have adopted them and other initiatives that have yielded safer working conditions for employees, he said.
Group testifies on IWIF's rating law. In addition to the rate cut announcement, the American Insurance Association recently testified at a hearing of the Maryland Insurance Administration and recommended that the IWIF abide by the same rating provisions as private insurers. Ken Stoller, senior counsel for AIA, said that in addition to being subject to thesamerating law applicable to the private market, the IWIF should also report its data to the National Council on Compensation Insurance. This position, Stoller said, is a reflection of the AIA's interest in ensuring IWIF's financial soundness, given that the fund serves as the residual market and is now a member of theMaryland guaranty fund.
"Where other state funds have not been regulated on the same basis as private insurers, problems have arisen that not only compromised the solvency of those state funds, but also negatively impacted the private market," Stoller said. "Applying the rating law to the IWIF will ensure that rates are adequate for the risks being taken."
Maryland is one of the only statefunds in the country that is not required to report loss data to NCCI or use NCCI experience ratings.
January 19, 2009
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