Labor and Economic Opportunity
The pure premium rate is the annual yardstick against which private insurance carriers can compare their rate structure for workers' compensation coverage for the coming year. The state's Data Collection Agency Board approved the 4.2 percent reduction in the average pure premium rate in August.
"The decline in the pure premium rate for workers' compensation is good news for Michigan employers," Keith W. Cooley, director of the Michigan Department of Labor & Economic Growth (DLEG), said. "It is a positive sign for the state's business climate and is encouraged by the success of our openly competitive insurance market."
The drop in average rates for 2008 is due in part to a reduced number of work-related injury claims due to well-developed safety programs; change in the nature of work today; and a fee schedule, which controls medical costs for work-related injuries and is revised annually by the state's Workers' Compensation Agency, a part of DLEG.
"Our workers' compensation program is doing an effective job of containing costs," Cooley said. "For example, a study issued earlier this year by the Workers Compensation Research Institute (WCRI) found that ‘costs per claim in Michigan were lower than typical compared with the 13 other large states in the study.'"
The WCRI study of workers' compensation costs among 14 large states found that Michigan's total costs per claim (2002-2005) remained 35 percent lower than the median for the study states. These states represent 60 percent of the nation's workers' compensation benefit payments.
The pure premium rates are developed by examining historical loss data reported by insurance carriers for individual job classes and then analyzing how the data will be affected on a year-to-year basis by any law changes or court decisions.