Dover – Insurance Commissioner Matt Denn announced Thursday that he will order an average workers compensation insurance premium cut of 17.75 percent for Delaware employers in the “voluntary” workers compensation market, which includes most businesses, and a 22 percent cut for businesses who purchase through the state’s assigned risk pool. They are the largest workers compensation premium cuts in Delaware since the creation of the modern rate-setting process.

 

With total workers compensation premiums paid by Delaware employers estimated at $103 million a year, the rate cuts ordered by Commissioner Denn likely mean savings of at least $18.2 to Delaware businesses.

 

The premium cuts to be ordered by Commissioner Denn are independent from additional premium savings that are expected from legislation passed by the General Assembly last January with Commissioner Denn’s assistance. The additional savings generated by the legislation are not scheduled to be seen until late 2008 or early 2009.

 

The premium cuts announced Thursday are a result of changes Commissioner Denn required in the way that workers compensation insurance companies reserve funds for future medical losses.

 

“Our experts told us that the workers compensation carriers were overstating the amount that they needed to aside for future medical losses,” Commissioner Denn said. “When that extra money is set aside and not spent, the insurance companies keep it as profit. These rate cuts reflect a more realistic estimate by the insurance companies of what they really need to set aside.”

 

The orders pertain to applications by the Delaware Compensation Ratings Bureau, which submits an annual request for the “loss cost” calculations upon which all workers compensation insurance companies base their rates. The cuts announced Thursday are the largest since DCRB began submitting applications on behalf of the carriers in 1994.

 

Commissioner Denn noted that the rate cuts he was ordering were averages, and that different ratepayers would see different rates based upon the type of business they were in and their individual loss experiences.

 

Commissioner Denn’s announcement was welcomed by representatives of the business and labor communities. 

 

“I would like to commend Commissioner Denn and his staff for their pro-active stance on this issue and for working so hard to give our businesses here in Delaware some much needed relief form the high cost of workers compensation insurance,” said Rich Kenny, co-owner and chief financial officer of Shoprites of Delaware and immediate past chairman of the Delaware Retail Council.

 

Michael Ciabattoni, vice president of Teamsters Local 326, said, “Decreasing the cost of workers comp insurance is important for workers because it means more money will be available for pay and benefits for workers, and it means Delaware will be more attractive for new businesses with new jobs.”

 

After Commissioner Denn took office in January 2005, he made an independent actuarial review of the application and public comment part of the annual review process for the workers comp rate basis. He reduced a proposed increase in the workers comp basis for 2006 and then froze the average basis for rates for 2007.

 

Reducing workers compensation insurance premiums has been one of Commissioner Denn’s goals. He worked with a group of legislative, business, medical, labor and government representatives, on the workers compensation reform legislation that was passed by the General Assembly earlier this year. Last month, Commissioner Denn announced the creation of a self-insurance organization for counties, cities and towns in Delaware designed to help the local governments save taxpayer money on workers compensation insurance for their employees.

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