Florida OIR Unveils 2008 Workers' Comp Report

The Florida Office of Insurance Regulation (Office) has released to the Florida Legislature its 2008 Workers' Compensation Annual Report on the state of the market for workers' comp insurance. The report analyzes the availability and affordability of coverage for workers' comp insurance in Florida for the calendar year 2007 and concludes that the Florida workers' comp market is competitive.

Availability and affordability in the voluntary market overall is good, although small firms, new firms and construction firms might face affordability issues due to unique characteristics such as lack of historical risk experience and the nature of the risk.

Florida's residual market for workers' comp insurance is small relative to other states, which implies that the voluntary market is absorbing the vast majority of demand. And, since the 2003 legislative reforms, the Florida workers’ comp marketplace has experienced an overall average rate decrease of more than 60 percent.

The report shows that there are two primary reasons for the continued rate reductions: the claims frequency for workers' comp claims has been decreasing faster than medical costs have increased; and the continued crackdown on companies that fraudulently avoid payment for workers’ comp insurance has added more than $8 million to Florida’s premium base while providing greater protection for employees.

During 2007, 12 new workers' comp writers started doing business in Florida, bringing to 241 the number of companies that are actively writing workers' comp insurance in the voluntary market. Three of the 12 companies were new to the state, while nine companies were already operating in Florida, and expanded by adding the line of workers' comp. Of the 12, only one is domiciled in Florida. The other 11 companies are domiciled in New York, Delaware, New Jersey, New Hampshire, Nebraska, Missouri, Minnesota, Kansas, California and Arizona – another indication of the vitality and competitive nature of the Florida marketplace.

For calendar year 2008, Commissioner Kevin McCarty has approved an 18.6 percent reduction in Florida's workers' comp insurance rates that will become effective Jan. 1, 2009. The reduction in rates will save Florida employers more than $610 million and represents the sixth consecutive drop in workers' comp rates since the Florida Legislature passed the reforms in 2003; and with this change, the cumulative overall statewide average rate decrease since 2003 will be more than 60 percent.

In addition, the approved 2008 decrease of 18.6 percent is the largest one-year decrease on record, following the two previous largest decreases – 18.4 percent for 2008 and 15.7 percent for 2007. The last six filings represent the largest consecutive cumulative decrease on record in Florida workers' comp rates – dating back to 1965.

Still under review by the Office, however, is a request for an 18.6 percent rate increase over two years by the National Council on Compensation Insurance (NCCI). The NCCI rate increase request is based on the Oct. 23 Florida Supreme Court ruling in Murray v. Mariner that eliminates the statutory caps on attorney fees and provides for a return to the "reasonable fee" standard for attorneys handling workers’ compensation claims – and could stall the recent pattern of rate decreases.

The NCCI has proposed implementing a first year increase of 8.9 percent, to become effective March 1, 2009, if approved by McCarty. An order from the commissioner is expected soon.

A copy of the 2008 Annual Workers' Compensation Report and copies of reports from 2004-2007 are available on the Office's Web site at www.floir.com.