Workers’ compensation insurance begins steady decline

By Ken Mammarella
Special to Delaware Business Times

Mohawk Electrical Systems in Milford figures that being a safer place to work has saved $75,000 over the last 30 years in its premiums for workers’ compensation insurance. Those savings are part of a welcome statewide trend.

Workers’ compensation insurance rates, effective Dec. 1, are going down for the second year in a row, according to Delaware Insurance Commissioner Trinidad Navarro.

The average decline in the voluntary market is 10 percent, and the decline in the residual market – an assigned-risk market from the Delaware Workers Compensation Insurance

Plan for employers otherwise unable to secure the required coverage is 7.29 percent. That’s atop a 5 percent dip in 2017.

“We’re hoping lower rates will attract more business,” Navarro said.

Delaware still has a long way to go. In 2011, 2012 and 2013, it had the highest percentage increase in these rates, he said. And it’s still among the 10 most expensive states.

An October survey by the Oregon Department of Consumer and Business Services puts Delaware at No. 5, with a 2.50 index rate, a number that tries to mesh different state rules into a single, comparable figure. That compares to 2.84 for New Jersey, 1.85 for Pennsylvania and 1.33 for Maryland. New York is at the top, with a 3.08 index rate, and North Dakota at the bottom, at 0.82.

In the voluntary market, the 10-year average premium is $14,270, Delaware has calculated, with the residual market at $7,695. The voluntary market costs more, the state points out, because those premiums involve larger businesses with more employees.

Several factors have led to to the decline in premiums.

One is the workers’ compensation fee schedule (the maximum charges for various medical procedures), which has set as its goal to cut medical costs by 33 percent, the state insurance office said. The schedule, implemented this year, ties workers’ compensation fees to Medicare reimbursement levels.

Another is the review by the insurance department and the Delaware Compensation Rating Bureau. Citing “national statistics and actuarial findings, the department has negotiated bigger decreases” with insurers, Navarro said. “Companies rarely get what they ask for.”

Safer workplaces have also led to declining claim severity and claim frequency. In calendar 2015, there were 2,239 indemnity (lost-time) claims and an additional 5,508 medical-only claims.

A big push on safety comes from Delaware’s Workplace Safety Program, from the insurance department and the bureau. By participating, 1,500 companies in calendar 2017 saved $9.8 million on their premiums, Navarro said. Participating companies can can save up to 19 percent on the Delaware portion of their workers compensation insurance premiums.

In 1987, Mohawk was the first to sign up for a prototype, and the program was made official in 1989. Mohawk has gone as long as 920 days with a reportable injury, according to Jeff Winslow, marketing and communications manager. Its current streak for its 28 workers is about six months.

To participate, companies must submit an application and undergo inspections – the first two scheduled, with later ones surprises. “We have always viewed the semiannual inspections not as a burden but an opportunity for improvement in our safety program,” Scott Welch, third generation president and owner of Mohawk, once wrote. “An outside set of eyes helps keep our personnel focused on safety and reminds everyone our No. 1 goal is our employee well-being.”

“Some fear it’s an inspection like OSHA,” Navarro said. “It’s not. It incentivizes and fosters a safe and healthy environment. There are no fines.”