Florida Workers’ Comp Premiums Going Down?
Just under a year since Florida workers’ compensation rates shot up by 14.5 percent, Florida businesses may get some relief in their workers’ comp premiums.
The National Council on Compensation Insurance (NCCI) has recommended to Florida regulators an overall premium level decrease of 9.6 percent, effective Jan. 1, 2018.
The filing submitted to the Florida Office of Insurance Regulation (OIR) includes a statewide average premium decrease of 9.3 percent and a reduction of the fixed expense cost applicable to every workers’ compensation policy in Florida from $200 to $160. The filing includes a 1.9 percent decrease in expense provisions, including a proposed decrease to the Profit & Contingency provision from 2.75 percent to 2 percent.
Rate level changes by industry group are as follows:
- Manufacturing: -10.3 percent
- Contracting: -6.9 percent
- Office and Clerical: -11.3 percent
- Goods and Services:-10.4 percent
- Miscellaneous: -8.1 percent
According to a statement from the rating organization, which is authorized to make rate filings on behalf of workers’ compensation insurance companies in Florida, the proposed rate reduction represents a continued improvement in claim frequency of more than 8 percent over the last two years.
NCCI said the 8 percent decrease in claims is the major driver of the proposed decrease, which comes just a year or so after two 2016 Florida Supreme Court decisions sent rates up 14.5 percent for 2017.
NCCI said those cases, Castellanos v. Next Door Company, and Westphal v. City of St. Petersburg, brought about retroactive changes to claimant attorney fee and benefit levels. NCCI noted its filing for the 14.5 percent increase in October 2016 addressed the projected impact of the two court decisions, including future upward pressure on claim costs as well as a growing unfunded liability on open claims. The OIR approved increase took effect on Dec. 1, 2016.
The biggest cost driver behind that rate increase, according to NCCI at the time, was Castellanos. The decision found the state’s mandatory attorneys’ fee schedule for workers’ compensation cases eliminated the right of a claimant to get a reasonable attorney’s fee — a “critical feature” of the workers’ compensation law. The impact of the Castellanos decision equaled 10.1 percent of the 14.5 rate increase, while Westphal accounted for 2.2 percent.
Florida state legislators attempted to enact reforms earlier this year that would stem any future changes to Florida’s workers’ comp market as a result of the court cases. Those reforms failed, however, and stakeholders warned of additional rate increases in the future.
But NCCI says that won’t be the case, this year at least.
“The [current] filing assumes that the 14.5 percent increase is adequate to cover the increased claim costs due to the court cases. No further increase is necessary,” said NCCI Marketing Communications Director Dean Dimke.
Industry advocates say this filing for a rate decrease is not a reason to shirk enacting workers’ comp legislative reforms in 2018.
“The recent rate filing made by NCCI mostly reflects frequency and experience data that pre-dates the Castellanos and Westphal decisions. Experience data relating to the impact of Castellanos and Westphal continues to mature and will likely be reflected in future rate filings,” said Logan McFaddin, Southeast director for the Property Casualty Insurers Association of America (PCI). “The Florida Supreme Court decisions create systemic instabilities that warrant legislative attention.”
OIR said it will review the 2018 Florida workers’ compensation rate filing by NCCI to ensure the proposed changes are not excessive, inadequate, or unfairly discriminatory.
It will also evaluate its potential effects on the insurance marketplace and employers, who are required by law to carry this insurance on their employees.
A public rate hearing will be conducted in October.