Florida Insurance Commissioner Kevin McCarty announced today he has disapproved the workers' compensation insurance rate filing submitted by the National Council on Compensation Insurance as too high.

NCCI's filing called for a statewide average rate decrease in workers' compensation insurance rates of 13.3 percent effective Jan. 1, 2007, but Mr. McCarty said he has ordered NCCI to amend its filing to bring about a rate reduction of 15.7 percent

According to Mr. McCarty, the rate reduction recommended by NCCI was primarily due to a significant drop in claims frequency and a reduction in the cost of claims. He said he has disagreements with the methodology NCCI used to project losses and with the trend factors used in the filing. Trend factors incorporate changes in wages, paid losses, and claims frequency.

The overall average rate decrease of 15.7 percent would produce a savings of over $400 million for Florida employers, stated Mr. McCarty.

A rate hearing on the filing was held by the Office of Insurance Regulation on Oct 9.

NCCI now has until Nov. 1 to file amended rates or it can appeal.

Last year NCCI proposed a rate reduction of 7.2 percent and Mr. McCarty said that was not enough and he dropped it an additional 6.3 percent for a total cut of 13.5 percent, which NCCI acceded to.

While he rejected NCCI methodology, Mr. McCarty did not accept what he heard at the hearing from the office of Stephen C. Burgess, insurance consumer advocate with the Florida Department of Financial Services.

The Consumer Advocate, he said, had testified that Florida employers had been overcharged by $1.7 billion during the past 10 years. This, wrote Mr. McCarty, is "not supported by credible evidence due to the use of incomplete and incorrect expected loss ratios and by failing to recognize that policyholder dividends are not a component of the expected loss ratio."

According to Mr. McCarty, annual financial statements filed by Florida insurers confirm that over $1.3 billion of policyholder dividends was paid to Florida policyholders during this 10-year period

"The Consumer Advocate's analysis does not recognize that with this filing workers' compensation rates will have been reduced by almost 40 percent since Oct. 1, 2003," he wrote.

Lori Lovgren, state relations executiveat NCCI, said no decision has been made about an appeal she said concerning the rates that while NCCI is optimistic about an increased drop in claims frequency and cost "the department is is slightly more optimistic."

Special Reports /

Fla. Regulator To NCCI: Set Comp Rate Lower

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