Will Workers' Compensation Rates Receive the 3.8% Increase?

Short‑Term Impact on Workers' Compensation Premiums

The 3.8% increase announced by the state insurance commissioner applies broadly to general liability, property, and auto insurance. Workers' compensation, however, is governed by its own statutory schedule and may not see the same automatic hike. In most jurisdictions, the workers' comp rate schedule is reviewed annually, but the 3.8% figure is not automatically transferred to that schedule. Employers may see a modest rise—often between 0.5% and 2%—if the state's underlying loss data justify it, but the exact change depends on the insurer's rating methodology and the employer's loss history.

Factors Determining the Workers' Comp Adjustment

Several variables influence whether and how much workers' comp rates shift:

• Claim Frequency and Severity: A higher volume of claims or more severe payouts pushes the risk pool higher, prompting insurers to raise rates.
• Industry Classification: Certain industries (construction, manufacturing) have historically higher claim costs; insurers may adjust these classes more aggressively.
• Historical Loss Ratios: Insurers compare current loss ratios to prior years. A 10% increase in losses can trigger a rate hike even without a statutory change.
• Regulatory Review: State insurance departments review workers' comp schedules annually. If the commissioner deems the current schedule underpriced, a formal adjustment follows.

How to Prepare for Potential Rate Changes

Employers can mitigate unexpected increases by:

• Implementing Safety Programs: Reduced injury rates lower loss ratios, often resulting in lower premiums.
• Maintaining a Clean Claims History: Prompt and thorough claim management signals responsible risk handling.
• Reviewing Policy Language: Ensure coverage limits match business needs without excess exposure that could inflate premiums.

What to Expect in the Upcoming Policy Year

The next workers' comp rate schedule will be published in the spring, following the annual review cycle. While the 3.8% increase does not automatically transfer, insurers may adjust rates by 1%–3% if loss data support it. Employers should review their current quotes and consult with their brokers to understand the specific impact on their policy.