Resources & Insights

Workers’ Compensation Rates Expected to Fall in 2021

November 11, 2020

Scott Carlson,
President, Construction Practice

4-minute read

Workers’ compensation premiums next year could once again be coming down for a lot of Colorado employers.

Insurers have yet to come out with their own figures, but the Colorado Division of Insurance has approved a reduction averaging 8.4 percent for the “loss costs” and the “rating values” components of workers’ compensation premiums for 2021.

That figure, it’s important to note, does not include Loss Cost Multipliers that insurance companies tack on. Last year, regulators approved an 8.5% decrease, but many insures adjusted their LCMs to one degree or another. In doing so, they wiped out any reduction in premium in some cases.

Still, many employers next year could well see the seventh consecutive year of a decrease in workers’ compensation rates.

The average reduction (before LCM adjustments) for contractors would be 10.5%, 8% for manufacturing operations, 9.2% for office/clerical jobs and 7.7% for those in the goods and services industries.

It’s important to note that any given company’s rates can differ wildly depending on a number of factors, including the number and severity of injury claims they file, not to mention the industry they’re in.

“Loss costs” are the average cost of lost wages and medical payments of workers injured during the course of their employment. “Rating values” are used to calculate a company’s “experience modification factor.” The lower a company’s e-mod, the better. Insurers use these costs to calculate their premiums, which, among other things, also are influenced by how well their investments perform on Wall Street.

Also read: Why Workers’ Comp Isn’t for Workers Only

Workers’ compensation insurance pays for lost wages, medical bills and the cost of rehabilitation for a worker injured on the job. It also provides death benefits and funeral expenses for the dependents of someone killed in a work-related accident or disaster.

Employers in Colorado must provide workers’ compensation coverage for their employees if one or more full or part-time persons are employed.

While rates might be dropping, companies will want to keep a close eye on their own e-mods. A few tips to help keep your workers’ compensation costs down:

  • Make sure your risk management and safety and training programs are up to snuff. Remember, an ounce of prevention truly is worth a pound of cure. Studies have shown that every $1 invested in injury prevention results in a $2 to $6 return for businesses.
  • Employers should also take care when hiring, even during a time of labor shortages, to weed out candidates who could pose either a safety or moral hazard risk to the company.
  • Make sure your return-to-work program is designed to help injured employees return to work as soon as possible.

One final note for now: the full impact of COVID-19 on workers’ comp premiums did not enter the rate-setting equation for 2021. It may well be that premiums will drop even more dramatically because of the high unemployment figures we saw for much of 2020, but we’ll have to wait and see.

Scott Carlson is the president of CCIG’s Construction Practice. Reach him at or at 720-212-2040.

CCIG is a Denver-area insurance, employee benefits and surety brokerage with clients nationwide. We do more than make sure you have the right policy. We help you manage your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.

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