The MCIT Board of Directors’ rate setting discussion in July is an analysis of anticipated frequency and cost of future claims; member risks and initiatives; and the outlook for future operating costs—most notably, the cost of reinsurance. The setting of contribution rates is perhaps the most important decision MCIT makes affecting the bottom line of a member’s annual budget.
Scott Anderson, president of Actuarial Advisors, MCIT’s long-term actuarial partner, presented the results of the 2023 rate analysis for the property/casualty and the workers’ compensation divisions. His recommendations reveal two different scenarios. For 2023, the property/casualty (liability) aggregate rate increases 1.9 percent, and the workers’ compensation rate decreases 10.9 percent.
In setting rates, the MCIT Board of Directors is committed to ensuring that they reflect anticipated losses.
Property/Casualty Rates Increase
Anderson’s analysis of the seven individual coverage lines that comprise the property/casualty division resulted in both favorable and unfavorable rate development.
Continuing a multiyear trend, public officials liability and law enforcement liability rates continue to climb at 7.2 percent and 22.8 percent, respectively. It is these lines of coverage that respond to claims alleging violations of civil rights, including those arising from jail operations and law enforcement activities in general.
According to MCIT’s liability reinsurer, County Reinsurance Limited, increasing frequency and severity of claims from law enforcement operations is a national trend. Anderson also reported that claim frequency coupled with more expensive auto parts due to inflation and supply chain issues have contributed to auto physical damage rates increasing by 9.4 percent for 2023.
On the positive side, Anderson reported that rates decrease by as much as 17.6 percent for auto liability, general liability, property and inland marine coverages. MCIT has seen fewer losses than expected in these areas.
A member’s property/casualty contribution is determined by applying its unique exposure base (i.e., budgets, employee counts, scheduled vehicles, property values) to these individual rates.
Contribution amounts also reflect an 8.6 percent increase applied to building values and a 9.8 percent increase applied to building contents and property in the open values for members’ covered property. This is a result of an annual study designed to align scheduled values with the cost to replace a building, its contents or property in the open in the event of a covered loss.
Workers’ Compensation Rates Decrease
Anderson was pleased to report favorable loss trend development for workers’ compensation, noting in particular that claims arising from the pandemic did not materialize as expected. Although MCIT received numerous Covid-19 claims, the program has been fortunate with relatively low severity.
Anderson’s analysis considers job classifications across the membership. As a whole, losses did not develop as expected, resulting in a recommended aggregate rate decrease of 10.9 percent for 2023.
The division has enjoyed three consecutive years of improving claim trends, resulting in aggregate rate decreases. However, Anderson continues to monitor post-traumatic stress disorder (PTSD) claims—primarily out of law enforcement—for adverse development, as the frequency and severity of these claims continues to increase.
Although the rate for each job classification code does not vary among members, the cost of workers’ compensation coverage is influenced by each member’s experience modification factor, or “mod rate.” The mod rate is an actuarially determined reflection of an individual member’s actual losses compared to the average of expected losses.
Renewal Notices to Be Mailed
MCIT will mail renewal notices to members no later than Aug. 21 as required by the MCIT Bylaws. Members who have questions regarding their 2023 contribution should contact MCIT underwriting at 1.866.547.6516.