The Beacon Mutual Insurance Co. has filed a proposal for new workers’ compensation rates that not only would cut base rates by an average of 27.7 percent, but also would drop the minimum premium to $200 and eliminate an “expense constant” of about $160 per policy.
For small employers, who now pay a minimum of $206 to $750 depending on their industry class, and who often have no choice of carriers, the filing could result in major savings.
For Beacon, which as of 2004 controlled 73 percent of the Rhode Island workers’ comp market and serves as the insurer of last resort, it’s a chance to show it wants to lower premiums even though it’s twice refused to adopt a national group’s advice for rate reductions.
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A year ago, the R.I. Department of Business Regulation approved a 20.2-percent cut in the “loss cost” guidelines issued by the National Council on Compensation Insurance – expected claims payouts, the core of rates. On Jan. 5, another 4.2-percent cut was approved
.
After Beacon refused to adopt the 2005 NCCI loss costs and said it wouldn’t participate in hearings on the 2006 proposal, the DBR ordered it to either change its stance, or file an alternative by Jan. 16.
Meanwhile, Beacon is fighting in a General Assembly to have major changes to its corporate structure approved – with Gov. Donald L. Carcieri strongly opposed. But it also is making a $20-million dividend payout to policyholders, equivalent to 12 percent of 2005 premiums. This is the next step.
“This filing represents another major step for the Rhode Island workers’ compensation system,” Beacon President and CEO Joseph A. Solomon said in a news release. He noted that loss costs alone would drop by as much as 36 percent for some policyholders, “and not one of our insureds will see an increase as a result of this filing.”
Beacon’s stated reason for filing a separate set of rates is that it wants to use all-local figures where possible, to develop rates that better reflect the market. It also says it has to take into account its status as the insurer of last resort.
But Beacon’s filing goes beyond loss costs, expense constants and minimum premiums.
For starters, the company wants to be allowed to favor employers with a single location, those with a single employee, those who have stayed with Beacon for a longer time, and those who have been loss-free – all factors that it says have proven to affect loss experience.
Furthermore, Beacon wants to extend experience rating and credits for participation in safety programs, among other things, to all employers.
Jeffrey C. Johnson, vice president of community relations for Beacon, acknowledged that the change wouldn’t save all small employers money, but he said it would be “a reward” for those who pay attention to worker safety, and “some discipline” for those who don’t.
“Nobody cares about the little guys,” Johnson said, but “we do, because it’s the majority of our customers.”
