Tennessee Takes a 10.2% Average Decrease in Workers’ Compensation Loss Costs

Tennessee’s insurance commissioner has approved a 10.2% average decrease in workers’ compensation loss costs for the voluntary market. This decrease marks the tenth straight reduction for the state.

In a December 14, 2022 order from Commissioner Carter Lawrence, the Tennessee Department of Commerce and Insurance approved a recommendation from the National Council on Compensation Insurance (NCCI). The NCCI acts as the rating and analysis bureau for 38 states and submitted the 10.2% decrease in September. The Tennessee Advisory Council on Workers’ Compensation recommended a smaller average decrease of 7.6%.

After the Tennessee State Department of Commerce and independent insurance actuaries reviewed both recommendations, the commissioner weighed the information and decided to proceed with the NCCI recommended decrease. The new loss costs and rating values will take effect March 1, 2023. The actuarial firm for the department noted that although claim frequency had increased in 2020, perhaps due to COVID-19 illness claims, indemnity costs had fallen by more than 8%.

This trend of declining loss costs reflects a decades-long, nationwide trend reflecting fewer workplace injuries and lower insurance costs for employers. Since 2013, approved workers’ compensation rates in Tennessee have decreased significantly.

It should be noted that this trend of continued decreases has occurred in many other states across the nation as well.

The decreases are a product of a greater emphasis on smart workplace safety by regulators, stepped up safety initiatives by insurance companies and greater ownership workplace safety efforts by employers. In addition, a series of reforms put forth by Tennessee and other states has helped contain the total cost of risk associated with workers’ compensation.

Nevertheless, after consecutive years of decreases, one cannot help but consider where the floor is relative to loss cost decreases considering medical inflation and other factors. Has a position of equilibrium been reached or is there more room to go yet? At this point, this is perhaps a rhetorical question and a bit of a thought exercise. However, it is important to consider the issue from a macro perspective relative to the health of the workers compensation insurance marketplace in general. Today, Tennessee enjoys a very healthy and competitive workers’ compensation insurance market to the direct benefit of clients. Together, we need to be vigilant in encouraging workplace safety as insurance professionals and continue to support smart workers’ compensation measures to build upon the success of the past ten years.