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Vermont companies have seen their employee compensation rates fall for the seventh year

Vermont Business Magazine Governor Phil Scott and Department of Financial Regulation (DFR) Commissioner Kevin Gaffney announced today that Vermont businesses will see another rate cut on workers’ compensation in 2023. This is the seventh consecutive year of such cuts. The rate cut, effective April 1, will save Vermont employers more than $11 million in premiums in 2023.

“Reducing the cost of doing business in Vermont is critical if we hope to attract and retain employers in our state, and it will make a difference,” Gov. Scott said. “I would like to thank our team in the Department of Financial Regulation for overseeing the rate approval process and ensuring workers are well protected while their employers receive the best coverage at the most cost-effective rates.”

The multi-year declines reflect continued efforts by Vermont employers to maintain secure jobs and an ongoing focus by the department on workers’ compensation insurance. The 2023 rate reduction follows many years of declining claims trends: -2.5 percent for compensation (wage replacement) and -3.0 percent for medical claims costs in 2023. The Department expects the trend of falling claims frequencies to continue. Vermont employers will pay nearly 47 percent fewer workers’ compensation premiums than in 2016.

Employers purchase workers’ compensation through one of two markets: the voluntary market and the allocated risk market. Downtime costs are the main component of workers’ compensation rates. On the voluntary market – the open competitive market – claims costs fall by an average of 6.7 percent. Approximately 90 percent of Vermont employers purchase voluntary market coverage. In the assigned risks market – the market for employers who cannot obtain cover in the voluntary market – rates will fall by an average of 6.9 percent. The continued interest rate relief in the assigned risk market is particularly good news for new companies, which often have to obtain cover through this market due to a lack of claims history.

A history of recent interest rate activity in Vermont for the voluntary and allocated risk markets is below:

Effective Date

Change in Loss Cost

Change in the assigned risk rate

1.4.2017

-7.9%

-8.0%

1.4.2018

-3.7%

-7.6%

1.4.2019

-5.1%

-9.2%

1.4.2020

-11.6%

-12.1%

April 1, 2021

-5.5%

-4.6%

1.4.2022

-4.9%

-5.6%

1.4.2023

-6.7%

-6.9%

Rate changes vary by industry and classification. However, several key Vermont industries with historically high rates saw significant declines in 2021 and 2022, and most of these employers will see further cutbacks in 2023. Some sectors of the ski industry will see rate cuts of 5 to 16 percent, while the dairy industry sees rate cuts of between about 6 percent and 7 percent. Breweries can expect rate declines of about 15 percent.

1/25/2023. Governor. Montpelier www.vermont.gov

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