2013-12-11 CC Packet - Laserfiche WebLink

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• Auto liability rate adjustments. The auto liability rates needed to generate the LMCIT program auto liability revenue targets are partly a function of the transition capping parameters discussed above (capped at 30% and constrained at 10% for the first year and capped at 30% and constrained at 20 %). Adjustments to the manual rates are needed this year to maintain the same level of projected auto liability premium revenue for the program. The rates are designed to generate no change in the amount of total auto liability premium for the program as a whole. In addition, LMCIT is no longer making a per vehicle charge for Underinsured/Uninsured (UM/UIM) coverage. The cost of UM/UIM coverage is now included in the auto liability rates. On average for members, auto liability premiums are projected to be flat, but the effect on individual members will vary. • Experience rating changes. LMCIT will change the way it uses experience rating to determine no -fault sewer backup and liquor liability rates. • Liquor liability. The existing experience rating component will be eliminated, which means many members will no longer receive experience modification credits they've received historically. Moving forward, members that have had a liquor liability loss within 5 years of their renewal date will incur a 10% debit. However, because LMCIT is decreasing on and off sale liquor liability rates 23 %, no individual member will experience an increase in premium due solely to the elimination of the experience rating credits, The combination of the rate changes and the experience rating change will result in an average premium decrease of 14 %, but the effect on individual members will vary between about 0 -23% in premium decreases. • No-fault sewer backup. Members that have incurred no losses under the no -fault sewer backup coverage within a 3 year rating period will receive a 10% credit. Members that have incurred losses within the rating period at a per- connection frequency that is higher than the program average will receive a 10% debit. Members received a memo last year detailing the specifics of the new liability rating system. This memo, along with subsequent changes to the system, can be found at www.imc.org/ratin Workers' Compensation Members with renewals on or after January 1, 2014 will see a 10% increase in overall rate levels, which is driven by a few main factors: • Medical trend. One of the main reasons for this year's rate increase is because of rising medical costs, which now makes up 60% of LMCIT's total workers' compensation loss costs. Rates for 2014 assume that medical costs will continue to increase at a rate of about 9% annually. Because the increase in medical costs continues to outpace the increase in wage levels, all else being equal it takes about a 2- 3% premium rate increase each year iust to keep up with medical inflation, Additionally, over the past year medical costs on old claims from injuries up to 20 or more years ago increased more than what LMCIT had previously projected. LMCIT's reserves and fund balance can easily cover these increased costs, but it has to take that changed development pattern into account when setting rates for 2014. In other words, LMCIT has to assume that it will see similar development many years out in the future on the claims for the injuries that occur in 2014. This factor accounts for about 5% of the rate increase needed for 2014. • Benefit changes. The rates assume a slight increase of about 1 percent for new legislation related to Minnesota's workers' compensation system. The two most significant changes include an increase in the maximum compensation rate and an extension of workers' compensation coverage for post - traumatic stress disorder. 31 Page