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Friday, November 03 2017
Florida Insurance Commissioner David Altmaier has ordered a statewide overall workers’ compensation rate decrease of 9.8 percent, a slightly higher decrease than the 9.6 percent decrease filed by the National Council on Compensation Insurance (NCCI) back in August.
Altmaier’s order disapproving NCCI’s 2018 rate filing was issued by the Florida Office of Insurance Regulation on Tuesday, and stated NCCI’s rate request be amended and refiled by Nov. 7, 2017.
Altmaier’s order cited NCCI’s 2 percent allowance for profit and contingencies in its rate filing as the reason for rates being disapproved. The order states that the refiling should contain a profit and contingencies provision no greater than 1.85 percent.
The rate decrease will come as a welcome surprise for many Florida businesses that were expecting additional rate increases after the Florida Supreme Court issued two decisions – Castellanos v. Next Door Company and Westphal v. City of St. Petersburg, – in 2016 that sent rates up by double digits this year.
“Using new data, this experience based filing proposes a decrease in rate level based on data from policy years 2014 and 2015 valued as of year-end 2016,” the order states. “While some of the experience used as the basis for this filing occurred before the recent Florida Supreme Court decisions, a portion of the experience period includes claims that occurred after the decisions.”
At a rate hearing in mid-October, NCCI said a decline in claims frequency due, in part, to safer workplaces, enhanced efficiencies in the workplace, increased use of automation, and innovative technologies were partly behind the recommended decrease. NCCI said this trend is not unique to Florida but countrywide, and is expected to continue in the future.
According to OIR’s order, from 2011 to 2015, the cumulative decreases in the indemnity and medical loss ratios were 19.9 percent and 12.3 percent, respectively. The primary reason for the declining loss ratios is a significant reduction in the lost-time claim frequency which declined by 45 percent from 2001 to 2015 with over 8 percent of the decline occurring in 2014 and 2015.
“Even after considering the impact of the Castellanos and Westphal decisions, other factors at work in the marketplace combined to contribute to the indicated decrease, which included reduced assessments, increases in investment income, decline in claim frequency, and lower loss adjustment expenses,” the order states.
However, the order also mandates that NCCI provide detailed analysis of the effects of the Castellanos decision by the Florida Supreme Court in future filings, which accounted for 10.1 percent of the 14.5 percent increase in Florida workers’ compensation rates this year.
“To ensure workers’ compensation rates are not excessive, inadequate or unfairly discriminatory … it is imperative that additional quantitative analysis be conducted to determine the effect the Castellanos decision is having on the Florida workers’ compensation market and the data used to support future rate filings,” the order states. “The analysis may include alternative data sources and should examine changes to the Florida workers’ compensation market that are attributed to or observed as a result of the recent court decision.”
Approval of a revised rate decrease is contingent on the amended filing being submitted with changes as stipulated within the order. If approved by OIR, the revised rate decrease would become effective on Jan. 1, 2018 for new and renewal business.