Workers’ compensation insurers in Florida will be asked to explain their request for an average 8.3 percent rate hike today before the Florida Office of Insurance Regulation (OIR).
The OIR is holding a public hearing on a filing made by the National Council on Compensation Insurance (NCCI) on behalf of the state’s workers’ compensation carriers.
The proposal, if approved as filed, would raise rates for the following industry groups: manufacturing, 9.9%; contracting, 7.3%; office/clerical, 7.3%; goods and services, 7.9%; and miscellaneous, 10.8%. NCCI has asked that new rates go into effect starting Jan. 1, 2011.
Rates have been going down since lawmakers passed reforms in 2003. From October, 2003 through July, 2010, rates have gone down a cumulative 64.7%.
But the cost saving effects of reforms passed in 2003 appear to have ended, according to insurers. In a September report on the state of the market, NCCI said that claims frequency, which had been declining, is now flat and loss experience is deteriorating. The industry saw an underwriting loss in 2009. According to NCCI, the calendar year combined ratio in Florida in 2009 was 103%, compared to 88% in 2008.
Insurers are collecting fewer premiums due in part to the recession and high unemployment, particularly in construction trades, and earning less when they invest.
NCCI will have to convince stare regulators, including Insurance Commissioner Kevin McCarty, that it’s time for rates to go up. This past May, McCarty told Insurance Journal he thinks the 2003 reforms are still working.
If a rate increase is approved, it would be the first one since April, 2009 when a 6.4 percent rate hike was approved to reflect a 2008 state Supreme Court decision in Emma Murray v. Mariner Health Inc. that eliminated the statutory caps on attorney fees imposed as part of the 2003 reforms (SB 50A). The ruling enabled claimant attorneys handling workers’ compensation claims to collect increased fees for their services. However, later that year, the Legislature restored the cap (HB 903) and rates were rolled back to their previous levels.
The last decrease, 4.2 percent, which went into effect in July, was due a change in the Special Disability Trust Fund (SDTF) assessment, a change that reduced insurance companies’ overhead expenses.
According to OIR, about 251 entities are writing workers’ compensation insurance in the state — 246 private insurers, four self-insurance funds, and the Florida Workers’ Compensation Joint Underwriting Association (FWCJUA). Florida’s overall workers’ compensation premium of about $2.3 billion ranks the state fifth nationally.