Florida Workers’ Compensation Joint Underwriting Association Operations Committee Meeting Report: November 23

The Florida Workers’ Compensation Joint Underwriting Association (“FWCJUA”) Operations Committee (“Committee”) met via teleconference on Monday, November 23, 2009.  The agenda included a legislative update, consideration of the 2010 FWCJUA business plan and forecast, changes to the FWCJUA budget, and a new travel policy.

FWCJUA staff reported that there is continued “serious talk” about the Florida Insurance Consumer Advocate preparing a bill that would implement a loss-cost rating system in Florida to replace the current pricing system.  Legislators also have expressed some interest in benefit reform, specifically the increase of workers’ compensation benefits in some areas.

The Committee voted to allocate additional funds toward implementing the FWCJUA’s new online, interactive application process.  Six additional system enhancements have been identified that require additional programming time to ensure a successful conversion.

The following items have been added to the FWCJUA’s 2010 business plan since the Committee last considered a draft version in August 2009: 

• Reconsideration of executive staff benefits mid-year to ensure competitive total compensation in 2011.
• Selection of a vendor for remote Web site hosting services when the current agreement for this service expires in June 2010.
• Implementation of a centralized network event monitoring system to increase security for the FWCJUA’s computer systems.

The FWCJUA business plan includes the following:

• Ultimate elimination of the Subplan “D” deficit; identification of any future statutory deficits;
• Maintenance of adequate rates through semiannual rate adequacy analyses;
• Minimization of operating losses;
  • In addition to continuing to concentrate on accurate underwriting, prompt policy issuance, premium collection, fraud prevention, market assistance, and evaluation of current performance standards, the FWCJUA will monitor the Internal Revenue Service’s development of regulations on what constitutes an integral part of a state, local, or Indian tribal government for federal income tax purposes, so that a Private Letter Ruling may be further pursued as appropriate.
  • Prior to July 1st, the FWCJUA will notify the Florida Office of Insurance Regulation (“OIR”) of the amount of the FWCJUA’s gross written premiums for the preceding calendar year. Pursuant to Florida law, whenever the FWCJUA’s reported gross written premiums are less than $30 million, the OIR is required transfer to the plan, subject to appropriation by the legislature, an amount not to exceed the plan’s fixed administrative expenses for the preceding calendar year, up to a maximum of $750,000.
• Providing rate adequacy exists, the maintenance of solvency with no policyholder assessments;
  • A reserve analysis on FWCJUA’s loss liabilities will be conducted, with a recommendation by subplan as to the necessity of an assessment to fund outstanding liabilities.
  • A risk assumption analysis also will be conducted in conjunction with either the reinsurance intermediary’s actuary or the FWCJUA’s consulting actuary that describes how much risk the FWCJUA could assume at various attachment points and the implications of that risk assumption.
• Pursuit of sound investments;
  • Competitive pricing on investment management services will be conducted through a comparative solicitation process.
• Maintenance of uncollectible premiums within acceptable limits;
• Maintain a dynamic organization capable of responding to market fluctuations in a timely manner;
  • The FWCJUA Board of Governors (“Board”) will explore the 2011 implementation of an on-line process that would permit agencies to issue certificates of insurance that would capture certificate holder information for policyholder underwriting and audit.
  • The Board also will select a financial auditor for 2010-2012.
• Implementation of an assessment, if necessary; and
• Promotion of loss prevention and workplace safety.

The FWCJUA  staff anticipates a budget increase of $300,000 in reinsurance rates due to the declining FWCJUA premium income and the number of companies willing to bid on its relatively small account.  A drop in premiums from $12 million this year to $8 million in 2010 also is anticipated, as well as a total decrease in income from $15,074,890 to $10,823,560.  Operating expenses are forecast to decrease from $9,758,336 in 2009 to $6,233,855 in 2010. 

Overall, the proposed budget would increase the FWCJUA’s current $81 million surplus by $2.7 million.

The Committee voted to approve the business plan and budget for consideration by the Board. 

It was noted that the FWCJUA’s Disaster Recovery and Emergency Preparedness Plan has been updated to include the most current contact and systems information.

In regard to the FWCJUA travel policy, a provision specifying that travel must be arranged through a certified minority travel agency has been removed because booking travel on-line has been determined to be less expensive.

Further, because the FWCJUA now has an automobile insurance policy that covers rental cars, employees are being instructed to decline any optional insurance coverage offered by a rental car company and to be sure the rental contract states the car is being rented “on behalf of the FWCJUA.”

The Committee unanimously approved the new policies without discussion.

The meeting materials, which include a copy of the business plan, are attached.

 

Should you have any questions or comments, please contact Colodny Fass.

 

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