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The Florida Office of Insurance Regulation (FLOIR) reached a
decision this week on the rate impact of the recent Supreme Court rulings on
workers compensation by granting contingent approval of a 14.5% rate increase
effective December 1, 2016. This
decision follows months of analysis and debate, a National Council on
Compensation (NCCI) filing, and a public hearing.
The filing proposed by NCCI and under review by the FLOIR was
for a 19.6% rate increase and had three separate components:
Ultimately, the FLOIR agreed with the proposed increases for
the latter two components, but only approved a 10.1% increase for the Castellanos
decision, resulting in the combined increase of 14.5%.
It is also noteworthy that the approval was granted only for
new and renewal policies, not for the outstanding portion of current policies
as was proposed in NCCI’s filing. In the
short term, this decision mitigates the financial impacts for policyholders but
intensifies the adverse impact for insurers. For example, a policy issued today will incur claims through August
2017, any of which could be affected by these changes. NCCI’s proposal was that insurers could
collect additional premium for the months on that policy subsequent to the
effective date of FLOIR’s approval. However,
FLOIR’s decision is that the increase only apply to policies written after the
effective date of the rate increase. The
policy written today would not collect any additional premium.
The even larger issue for insurers is that the Castellanos
decision can affect open claims all the way back to the 2003 reform that created
the attorney fee schedule. The current
rate increase does not provide in any way for the higher rates that would have
been collected over the last thirteen years had the fee schedule not been in
This could be very important as year-end approaches if these
changes cause Florida’s workers compensation insurers to significantly increase
their reserve levels with a corresponding negative impact on 2016 income.
Tim Mosler is a Senior Consulting Actuary based in Pinnacle’s Atlanta, Georgia office. He has worked in the property/casualty insurance industry since 1996 and consulting since 2001. Tim’s comprehensive career has focused on medical professional liability, workers’ compensation, general liability and commercial automobile. Tim is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. Since 2007, he has been a member of the CAS Member Advisory Panel and in 2013 he was named to the CAS Committee on Health Care Issues. He is a past member of the CAS Examination Committee.
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