California wants to raise Comp rates 29%, is this a precursor to Delaware?

Roughly 5 years ago California reduced comp rates dramatically based on a work comp reform initiatives and a predictive drop in claims and medical costs. This was celebrated by the Small business community as they felt a instant relief from high work comp costs. Now, the California compensation rating bureau says they need to raise rates 29% to avoid a potential comp crisis where market availability could be impacted. As expected this is coming with stiff resistance because of the recession. With this going on, I have think this could be the same outcome in Delaware. A few years ago DCRB rolled back rates and continues to reduce rates because of actuarial mandates and a new legislated work comp initiative. As far as I know to date the rates are holding as claim costs have been down and insurance companies have been able to make money in comp. However in talking to company representatives over the last 6 months, the trend is changing. The comp loss ratios are climbing and the companies see a point in the near future where they will need to raise rates. I can only surmise that the DCRB will have to make a rate correction soon in order to keep the insurance company markets stable. With the recession predicted to last a few years more, this will come at a tough time for small business. I always felt that the rate roll backs were excessive. The rates did need to be reduced in Delaware as the State was the 4th highest in the country just a few years ago. However the 40% or so reduction that has taken place probably went to far. The insureds have become dependent on the lower comp costs and my fear is they will have sticker shock when the rates finally do come up to the trending poor loss ratios. Only time will tell. Until next time be careful out there and know your risks. K

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