NCCI Rate Hearing Recap

On Monday, October 8, 2007, this office attended a public hearing held by the Florida Office of Insurance Regulation (“OIR”) regarding the National Council on Compensation Insurance (“NCCI”) Workers’ Compensation Insurance Rate Filing.  Both supporting and opposing public testimony was giving regarding the filing.

Florida Insurance Commissioner Kevin McCarty presided over the hearing, along with Jim Waterford, Belinda Miller, Andrew Sabolic and Ray Spudneck.  Commissioner McCarty provided brief opening remarks applauding the Florida Legislature for its actions on workers’ compensation insurance reform in 2003 and noting that Florida’s rates have dramatically declined since those statutory changes.

A representative from the NCCI provided background information and a status overview of the workers’ compensation insurance market.  Trends since the statutory changes of 2003, have included:  rates have declined by an approximate average of 50 percent, Florida workers’ compensation has increased, payroll has increased (due primarily to increased construction), Workers’ Compensation Joint Underwriters Association premiums have declined since 2005, claims frequency has declined, the Division of Administrative Hearings caseload has declined, and claimant attorney fees have declined.  In summary, the NCCI reported that the 2003 workers’ compensation legislative reform significantly contributed to a 50 percent reduction in rates.  The panel also agreed that the reforms played a major role.

Next, a senior actuary from NCCI provided testimony that included a technical review of the Florida rate filing procedures, results, and trends.  His testimony focused on the trends related to loss ratio, frequency and severity for indemnity and medical benefits.  The Florida trend is lower this year than last year, but the frequency could increase during the next three years.  The actuary stated that one reason the trends are lower this year is due to the non-utilization of upward judgment.  He also noted that Florida has one of the most negative trends in the nation.  Commissioner McCarty asked whether Florida workers’ compensation rates are inadequate or unfairly discriminatory to which the actuary replied that they were not.

An NCCI economist provided testimony on the property and casualty (P & C) factor.  He noted that P & C was equal to 2.4 percent with dividends and -0.2 percent without dividends.  Commissioner McCarty inquired why dividends were considered this year when they have not been considered historically, to which the economist replied that it is a fairness issue.  Some members on the panel expressed concern about using unusually high dividends in the analysis to which the economist responded that it is better to be more inclusive with information than less.  The P & C factor filing was zero.  The reason provided was that the data–with and without dividends–was substantially similar to last year’s filing. 

A representative from Madison Consulting provided a report on the company’s review of NCCI’s rate filing.  After explaining the process used to obtain the results, he concluded that NCCI has a reasonable filing and analysis and that their rates are not inadequate or unfairly discriminatory. 

A roofing contractor stated that the rates have declined precipitously since 2003 and that he expects a 16 percent decrease on January 1, 2008.  He also testified that his industry is seeking stability and certainty with rates.

Opposing testimony to NCCI’s rate filing followed.  A representative from the Florida Worker’s Advocate testified that he supports the Florida Insurance Consumer Advocate’s position that the rate filing is excessive and that the NCCI has failed to provide accurate and reliable data.  Commissioner McCarty asked whether his analysis included the use of an actuary and the representative said it did not. 

A representative from the Office of the Consumer Advocate provided testimony regarding that office’s position that the proposed NCCI rates are excessive.  First, it was noted that NCCI, as an insurance industry representative, is exempt from the anti-trust requirements.  This position was based on trends and profit positions.  Further, the representative noted that the 2003 legislation does not affect the trends as strongly as indicated by NCCI.  He also noted that worker’s compensation insurance rates should operate at an underwriting loss similar to medical malpractice insurance and that this loss should be made up in investment income.  He also stated that the premium-to-surplus ratio is unreasonable.

Commissioner McCarty concluded the meeting by stating that the Office of Insurance Regulation will take the testimony and written documentation into consideration and that the record will remain open through Friday, October 12, 2007.

The above information is a brief summary of the events and activities that took place during the public hearing and is not intended to be a comprehensive analysis of the issues contained herein. 

Please feel free to contact this office should you have any questions regarding this matter.