South Carolina workers’ compensation laws can be confusing and challenging for all individuals that participate in them, including workers and employers. Employers are responsible for buying workers compensation insurance coverage, and insurance companies are responsible for providing this coverage.
“Like other types of insurance, workers’ compensation insurance is regulated by the South Carolina Department of Insurance, which is responsible for ensuring that the coverage being provided by companies will protect workers and employers, and for ensuring that premiums charged for this coverage are reasonable,” said Gary Christmas, a South Carolina Worker’s Compensation attorney with the law firm of Howell and Christmas Injury Lawyers in North Charleston, SC. “The Department of Insurance requires that insurers submit their proposed rate increases prior to going into effect, allowing them an opportunity to review and approve.”
The process that goes into the calculation of premiums is complex, but one of the most important factors is what is called the “loss cost multiplier.” This is a number that is based on the insurance company’s anticipated payout for actual claims and does not include overhead or profit. The number is based either on historical payouts or expected future payouts based on trends in the industry.
Putting that into context: if an insurance company believes that they will need to pay out more in claims due to a trend of cases favorable to workers, they will ask for an increase in the loss cost multiplier. If they believe they will have to pay less, they may ask for a decrease in that multiplier.
South Carolina’s Department of Insurance (SCDOI) received a request from the National Council on Compensation Insurance – the industry group that requests increases or decreases on behalf of its insurers – to have all insurers reduce their loss cost multiplier by an average of seven percent. The SCDOI then required all insurers that operate in the state to provide updated premium information based on this decrease.
What does this mean for employers? Reduced costs for workers’ compensation insurance coverage. What does this mean for employees? It could mean nothing, or it could mean that insurance companies think that the state of the law is such that it will not have to pay out nearly as much this year in claims. That could be because of improved workplace environments and requirements, a larger desire to fight claims remains to be seen, or an unforeseen circumstance.