When lawmakers in 2003 enacted the first comprehensive set of workers’ compensation reforms in a decade, the driving political force was the protest from employers who were up in arms over the lack of available and affordable coverage. Now, some two-and-a-half years later, there are strong signs that the legislative intent of the reforms are working, as employers are benefiting from a highly competitive market. Lower rates aside, a reduction in costs, and a stable regulatory environment, are proving to make Florida once again an attractive market (as witnessed by the addition of 16 new carriers into the state since 2004). Now, as further evidence of the market’s successful rebound, the Office of Insurance Regulation has issued a new report that paints a picture of the market making gains both statewide and nationally, which presents the very real possibility that carriers may rack up their best numbers in years.


Traditionally, lawmakers avoid enacting comprehensive legislative insurance reforms since they are inherently controversial and typically pit multiple special interest groups against each other. This is especially true in workers’ comp, which has the distinction of being the most regulated line of insurance in the state. Therefore, lawmakers largely ignore problems in the marketplace until they become a main-street pocketbook issue. The run up to the 2003 reforms proved to be no exception to this legislative principle. Lawmakers were fully aware that the system desperately needed to be restructured prior to 2003. However, it was not until rates increased and carriers started canceling or nonrenewing policies — or even exiting the market altogether — that the public demand for coverage necessitated legislative action.

By now, the laundry list of reforms has been fully absorbed by the system. The restrictions on the use of construction exemptions have transformed much of how contractors do business. Medical providers are receiving higher reimbursements, and injured workers’ medical and indemnity benefits have been restructured. Claimant attorneys’ fees have been reduced in favor of the statutory fee schedule.

As for employers, their proof of the success of the reforms has come in the form of lower workers’ comp rates. Since the reforms, overall rates have decreased by roughly 30 percent and all five industry groups have seen significant rate reductions. In January, manufacturing classes saw an overall average 10.6 percent rate reduction, which represents a cumulative decrease of 27.1 percent since the 2003 reforms. Contracting classes received an 11.3 percent reduction for a post-reform cumulative rate cut of 27.7 percent. Office and clerical classes saw rates reduced by a minus 14.4 percent for a cumulative reduction of 14.4 percent, and goods and services rates dropped by 14.1 percent for a cumulative reduction of 30 percent. Likewise, miscellaneous classes saw a 17.1 percent reduction for a cumulative decrease of 17.7 percent.

Competition Returns

The OIR’s report on the state of workers’ compensation paints a picture of a market that has stabilized and is poised to make gains in a number of key categories. Among other things, the report found that the market consists of a large number of carriers, including a sizable number of new carriers that have entered the market since the 2003 reforms.

Based on anecdotal reports, there is a consensus among many carriers that the market has returned to a competitive state. As such, where employers used to be thankful to find one offer of coverage, they now have multiple options that give them the freedom to consider other factors when choosing a carrier. “The market is good and despite the rate reductions, there is more availability,” said Tom Koval, senior vice president and general counsel for FCCI Ins. Co. “We’ve talked to agents who say employers are no longer facing whether they can get coverage, but now are focused on such things as customer service.”

Researchers found that insurers were increasingly competing on a number of points that go beyond the pure price of a policy. The points are as follows:

Offering premium plans that allow greater flexibility in the amount of money needed to be paid up front and paid in installment plans

Demonstrating the availability and effectiveness of loss controls and emphasizing policyholder services in the areas of auditing, policy issuing, and providing certificates of insurance

Demonstrating the effectiveness of claim handling, including fraud detection, and

Providing help in setting up safety and drug-free workplace programs to provide employers with statutory mandated premium credits.

FUBA Workers’ Comp Executive Director Tom Stahl said the level of competition between carriers has even extended down to small contractors, the first to feel the impact of a tight market. Just a year or two ago, those employers had no choice but to find coverage in the Florida Workers’ Compensation Joint Underwriting Association, which requires employers to pay top rates and potentially face policyholder assessments. Now they have several coverage options, despite the fact that many insurers speculated the 30 percent cumulative rate reduction might cause companies to shy away from the market. “The market is competitive and the net effect of the rate decreases has been small.” he said. “Right now, for small employers, there is still plenty of availability.”

Part of that availability is coming from the increase in the number of insurers active in the market. Sixteen out-of-state companies entered the market including insurers from Texas, Michigan, Illinois, and North and South Carolina. The companies include the following: American Fuji Fire, Builders Ins. Co., Caterpillar Ins. Co., Great American Security, Great American Spirit, Great Divide Ins. Co., Guarantee Ins. Co., Key Risk, Ins. Co., Michigan Construction, and Pegasus Ins. Co. The other companies entering the market include Premier Group Ins. Co., Quanta Indemnity Co., Southern Ins. Co., Technology Ins. Co., TNUS Ins. Co., and Vinings Ins. Co.

Florida vs. Other States

Comparing workers’ compensation market rates on a state-by-state basis, researchers found that Florida’s market is performing well. Looking at pure loss ratios — which are calculated as the total losses divided by earned premium — Florida ranks 49th at 47.2 percent.

Looking at the national picture, researchers measured the states’ overall written premiums, the number of companies offering coverage, and the average premium per insurer. The national statistics include information from 45 states and the District of Columbia, excluding self-insurance funds. As expected, the size of a state’s workers’ compensation market tracks closely with the state’s population and workforce level. Therefore, it was no great surprise when researchers found the country’s four largest states had the highest written premiums. California by far had the highest premium volume at $16.5 billion, which was followed by New York and Florida at $3.5 billion and $3.4 billion, respectively. Texas ranked fourth at $2.7 billion.

As for the number of insurers providing coverage, in 2004 the range extended between a low of 118 in Alaska to a high of 295 in Georgia. The study found that Florida ranked 17th with 230 workers’ comp insurers, which is still above the median figure for all states of 217 companies. Over the last five years, the number of insurers in Florida has remained fairly consistent. In 2000, Florida’s market consisted of 244 insurers as compared to the national average of 222. Since that time, the gap has grown. In 2003, the number of insurers in Florida equaled 237 while the national average equaled 205. In 2004, that gap grew even further as the number of carriers in Florida dropped by seven companies for a total of 230 as compared to the national average of 199.

Another national measure is the average premiums collected per workers’ comp insurer. In most states, the market is dominated by a handful of companies that only write workers’ comp insurance. However, many other companies diversify and write a smaller number of policies, often as part of a package that includes general liability and other business coverages. With that caveat in mind, once again California ranks first with the average premiums by insurer at $73.9 million per insurer, which was followed by Florida at $14.6 million and New York at $14.5 million.


Company2004 WrittenMarketCumulativeRankNamePremiumShareMarket Share

1Bridgefield Employers$402,139,04211.3%11.3%

2Commerce & Industry$214,965,1796.0%17.3%



5The Florida Retail Federation SIF$147,944,7794.1%32.3%

6First Commercial$124,464,2653.5%35.8%

7Zurich American$112,201,6553.1%38.9%

8Associated Industries$106,737,9263.0%41.9%

9Valley Forge$89,411,3392.5%44.4%

10Amcomp Preferred$87,226,2242.4%46.8%

Total in Florida$3,572,354,26846.8%


Loss RatioLoss Ratio (Losses divided by (Plus defense cost, cost earned premium) containment expenses)


1West Virginia163.8%West Virginia172.9%







8New Jersey82%New Jersey89.5%

9Delaware80.4%South Carolina88.5%

10South Carolina79.9%Delaware87.3%