Florida government actuaries and analysts today began a study of a proposed 13.3 percent overall rate level cut for workers' compensation insurance recommended by the state's statistical agent.
The National Council on Compensation Insurance put forward that number yesterday, citing reductions in claims frequency and size that it attributed to 2003 comp law changes, which included limits on lawyers' fees.
The Boca Raton-Fla.-based NCCI's filing recommendation for a Jan. 1, 2007 rate change was made with the Florida Office of Insurance Regulation.
Bob Lotane, an OIR spokesman, said the agency has 90 days to act and seek an increase or decrease. If it does nothing, the proposed rate would stand.
He said OIR will schedule a hearing in September or October, and he guessed that action would be concluded by October.
"Generally we're in fairly decent agreement with the NCCI," said Mr. Lotane said. However, for the past two years Commissioner Kevin McCarthy disagreed and ordered additional reductions of 6.3 percent in 2005 and 2.8 percent the previous year.
"If he feels that the reductions should be more substantial, we'll ask them [NCCI] to go that way," said Mr. Lotane, noting that the office's actuaries and analysts were only beginning to examine the filing. "They are just breaking it down now."
NCCI said that when a minus-2.6 percent change in the state's premium discount program was factored into an overall premium level change of minus-11 percent, the rate achieved was minus-13.3 percent.
If accepted, the recommendation would represent a total reduction of $407 million for Florida employers, NCCI said.
The Council said Florida's lost-time claim frequency decline has been significant, and while the average size of the medical portion of the claim continues to grow, the decline in claim frequency more than offsets medical severity growth.
NCCI attributed the claim frequency declines to demographics, competitive labor markets requiring continuing improvements in working conditions and productivity, the impact of global competition, as well as technological improvements.
The Council said comp claims are now developing to a lower ultimate value. NCCI said a continuing improvement in loss development began prior to 2003 comp law reforms, and "appears to have been bolstered by those reforms–which, among other things, tightened compensability standards, limited attorney fees, and restricted the number of independent medical exams."
The NCCI said in June it did a survey of carriers representing 69 percent of the Florida market, and the results suggest ways that changes to the law are impacting losses.
o Less injuries may be achieving the most expensive permanent total (PT) disability status for claims. It mentioned Florida's frequency of PT claims was five-times higher than countrywide prior to the legal reform.
o The number of cases resulting in litigation and the level of activity on litigated cases appears to be down.
o Some types of cases are settling quicker.
o Dispute resolution is generally more efficient.
Sam Miller, executive vice president of the Florida Insurance Council, said NCCI's recommendation calls for "a hefty rate decrease–a very substantial rollback."
He noted that if the proposed change goes through, the cumulative rate decrease since 2003 would be 38.9 percent.
"If this is approved, that's phenomenal. We support NCCI. It's very good news for employers. It certainly vindicates the controversial and very important 2003 [reform] legislation," Mr. Miller continued.
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