In its 2018 Biennial Report, the Texas Department of Insurance has recommended that lawmakers delete from state statute references to classification relativities as an alternative basis for workers’ compensation rates.
The department noted that “‘Classification relativities’ are designed to establish the relative risk of job classifications in terms of workers’ compensation costs. This information can then be used by workers’ compensation insurers to help set rates for an insured business.” However, TDI said, only about 3 percent of the workers’ comp market uses them for establishing rates.
Currently, in addition to classification relativities, an insurer can choose from two other bases for setting rate: its own independent company-specific relativities, which no companies have filed with TDI; and loss costs determined by the National Council on Compensation Insurance (NCCI).
NCCI loss costs are filed annually with TDI, are subject to review, and are used by around 97 percent of the workers’ comp market, TDI said.
Because classification relativities are obsolete and little used, they should be eliminated, the department said. Texas is the only state that allows them as a basis in workers’ comp rate setting, TDI noted. Eliminating them as a basis for establishing rate “will make more efficient use of state resources with minimal impact on the market,” the department said.
The regular session of the Texas 86th Legislature convened on Jan. 8.
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