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Pinnacol to Cut Workers’ Compensation Rates by 7.4% in 2018

November 8, 2017

Colorado’s largest workers’ compensation insurer, Pinnacol Assurance, is cutting rates for next year by a whopping average of 7.4 percent, one of the largest drops in the past few years.

workers compensation rates
CCIG’s Andrew Mahoney.

The rate cut for 2017 averaged 3.2 percent for the insurer’s 57,000 or so Colorado policyholders. It was 3.6 percent for 2016.

Next year’s drop, effective Jan. 1, is partly attributable to Colorado’s strong employment and wage growth.

A decline in lost-time claims frequency and reductions in claims severity also have helped.

Workers’ compensation rates are set in part based on where “loss costs” are expected to head. Those expenses cover medical and lost-wage benefits, as well as the cost of managing claims.

The state Division of Insurance, which regulates rates, recently approved a 12.7 percent rate cut for 2018. Pinnacol didn’t go that far because it uses a 10-year historical experience period, compared to the state’s two years.

Related: Why Workers’ Compensation isn’t for Workers Alone

Using a longer period helps protect policyholders from rate volatility, minimizing big year-to-year swings.

Premiums are calculated in part based on a company’s experience modification factor, or “e-mod.” If claim costs are lower than average when compared with other organizations of similar type and size, then a company’s e-mod will be lower than 1, which means lower workers’ compensation premiums. On the other hand, if a company’s claim costs are higher than average, its e-mod will be over 1, increasing the premium.

In addition to approving a rate decrease for 2018, Pinnacol’s board of directors announced its intent to issue a general dividend to policyholders next year amounting to about $50 million. The general dividend is a portion of Pinnacol’s surplus shared with policyholders. The precise amount of the dividend will be set in February and is expected to be issued no later than April.

Since 2005, Pinnacol has returned more than $550 million in dividends to policyholders.

Andrew Mahoney is a CCIG Insurance Advisor. Reach him at or 720-330-7925.

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