Liberty Mutual Increases Auto Insurance Rates

The Liberty Mutual Fire Insurance Company received approval for a 6.9% rate increase, Liberty Insurance Corporation received approval for a 7.0% rate increase and First Liberty Insurance Corporation received approval for a 7.6% rate increase for private passenger automobile insurance. The companies originally requested rate increases of 8.0%, 7.7% and 8.6%, respectively.

The rate changes vary by territory and coverage. By coverage, liability rates will increase the most, ranging from 5% to more than 17% depending on territory and insurance underwriting company. Policyholders in Elko and parts of Clark County will see the largest increases.

The rate changes became effective for all policies produced and effective on or after

December 15, 2008.

On a combined basis, Liberty Mutual Insurance Companies Group is the 10th largest

writer of private passenger automobile insurance in Nevada, based on premiums written, with 2.9% market share.

NCCI Proposes Decrease for Worker's Compensation Loss Cost Rates

Council on Compensation Insurance, Inc. (NCCI) has submitted a filing for an average decrease of 4.9 percent for Nevada workers' compensation voluntary insurance loss costs. The NCCI has also filed for an average decrease of 6.0 percent for workers' compensation insurance assigned risk rates. By industry group, the proposed average changes are as follows:

The changes vary by classification and are as much as 20 percent above or below the average for the classification's industry group. For example, for classification 5645, carpentry - detached one or two family dwellings, the proposed change for the loss cost is -11.1 percent. This classification falls within the contracting industry group within which the loss costs have an average proposed change of -5.5 percent.

The changes are proposed to be effective March 1, 2009.

The NCCI filing also proposes an experience rating formula adjustment to bring the average experience modification closer to 1.00. Experience rating is used to encourage employers to maintain safe workplace environments. Under experience rating, employers with better than average recent historical experience pay less premium than those with poorer than average experience for the class of business. Experience rating applies to all but the smallest or newest employers. The impact of this proposed adjustment will be an overall 0.3% premium increase. With the proposed change to the experience rating formula, the overall proposed voluntary premium decrease is 4.6% and the overall proposed assigned risk premium decrease is 5.7%.

When comparing Nevada workers compensation loss costs and loss cost changes to those in other jurisdictions, it is important to keep in mind that the Nevada exposure base, payroll, is capped at $36,000 per employee per policy year. In other states, the full payroll is generally used to compute the premium. When wages increase, workers compensation premiums automatically increase since rates are a function of payrolls. In Nevada, the rate of increase in premiums, not considering the impact of loss cost changes, is less than the rate of increase in wages because the wages used to calculate the premiums are capped. To keep up with the increased benefits due to higher wage levels and other increasing costs, loss costs in a state where payroll is capped will have to increase more (or decrease less) than loss costs in a state where unlimited payroll is used.

The Nevada average annual wage is almost $37,000 per year (assuming a 40 hour work week with 50 weeks paid per year). While the median wage is lower than the average wage, a significant proportion of workers (more than 25 percent but less than 50 percent), earn more than $36,000 per year 1.

Decreasing claim frequency is driving the proposed decreases. Decreasing claim

frequency more than offsets increasing indemnity and medical costs per claim, the cost of living benefit adjustments that were enacted during the 2003 Legislative session and the impact of the payroll cap. 

Commissioner Kipper clarified that NCCI loss costs are only one component of the rates

charged by insurers and each insurer must file a loss cost multiplier to include expenses and profit. As a result, not every insurer charges the same rate. Commissioner Kipper urges employers to comparison shop for the best rate. In a competitive environment, such behavior is essential to maintain an efficient market.

The proposed rate changes are on file and available for public inspection at the Division

of Insurance in Carson City. They have also been posted to the Division's Web site:

http://doi.state.nv.us. Employers can comment on the filing by writing to the Division at 788 Fairview Dr., Suite 300, Carson City, Nevada 89701-5491 or by e-mailing the Division at insinfo@doi.state.nv.us. 

Commissioner Kipper anticipates making a decision on the filing within the next two weeks.