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Florida’s Office of Insurance Regulation announced it received the 2015 Florida workers’ compensation rate filing by the National Council on Compensation Insurance (NCCI), which proposes a statewide average rate decrease of 2.5 percent — the first decrease in four years.

NCCI said fewer claims and a lower amount of loss is responsible for the proposed rate decrease.

The statewide average rate change is based on changes to five industry groups: manufacturing, contracting, office and clerical, goods and services, and miscellaneous. The Office of Insurance Regulation said on Aug. 22 that it will review the filing to ensure the proposed changes are not excessive, inadequate, or unfairly discriminatory. Regulators will also evaluate its potential effects on the insurance marketplace and employers, who are required by law to carry this insurance on their employees.

The Office of Insurance Regulation anticipates conducting a public hearing on this rate filing in October 2014 and will release additional information about the hearing in the coming weeks. A rate order will follow, usually within three weeks. The new rates would become effective January 1, 2015.

The Office of Insurance Regulation said Florida’s workers’ compensation market remains one of the most competitive, efficient, and affordable, thanks in large part to the 2003 legislative reforms. Since then, Florida’s rates have dropped from first- or second-highest in the nation to 29th. Workers’ comp rates are 56 percent lower than they were in 2003. And the market continues to expand, with four of the top 10 writers based in Florida, according to the Office of Insurance Regulation.

NCCI’s Florida rate filing included the following observations:

• Rates are stable; the proposed change remains within +/-5 percent for the second year in a row; “normal” year-to-year changes are generally within this range;

• Loss experience in the two most recently available policy years (2011 and 2012) shows overall improvement for the first time since the 1/1/2010 rate change;

• Claim frequency declined in policy year 2012 (-5.2 percent) for the first time since policy year 2008; Florida saw its first increase in claim frequency in 10 years starting in policy year 2009; the claim frequency increases in policy years 2009, 2010 and 2011 may have been recession-related;

• Indemnity and medical loss ratios have declined, driven in part by a decrease in claim frequency; and,

• Interest rates have remained near historic lows for several years, which has prompted NCCI to request a higher profit and contingency provision of 4.5 percent in order for insurers to earn an adequate rate of return.

NCCI said that currently Florida’s workers’ compensation insurance costs remain stable overall and commensurate with other southeastern states.

However, NCCI also cautioned that rates could increase — perhaps dramatically — depending on the decisions issued in several pending legal cases. NCCI said it is monitoring these following cases: Castellanos v. Next Door Company; Westphal v. City of St. Petersburg; Morales v. Zenith Insurance Company; and Padgett v. State of Florida.

In the case of Padgett v. State of Florida, a Florida circuit court judge ruled this month that the state’s workers’ compensation law is unconstitutional because it no longer provides adequate benefits to injured workers giving up their right to sue. The ruling is expected to be appealed and for now there will be no change in how the workers’ compensation system operates.

NCCI said it is monitoring these court cases, and once final, will be prepared to issue estimated cost impacts and if necessary, submit amendments to the pending rate filing or submit future rate filings.

Source: Florida Office of Insurance Regulation, National Council on Compensation Insurance

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Topics Trends Florida Legislation Workers' Compensation Pricing Trends