OIR Finds 7.8% Workers’ Compensation Rate Change Justified
The Florida Office of Insurance Regulation has issued an Order on Rate Filing to the National Council on Compensation Insurance (NCCI) arising from its recent 8.3% rate request. The OIR did not find the full 8.3% to be justified, but does believe a 7.8% change is appropriate.
NCCI selected an indemnity trend factor within the range of data in the filing, but the OIR found the selected trend was slightly higher than indicated trends from 5-8 years. In addition, NCCI selected a profit and contigencies factor of 2.5%, which included anticipated policyholder dividends of 7.9%. The OIR found that workers’ compensation insurers in Florida have been able to pay policyholder dividends without express recognition of policyholder dividends in the filings. In addition, the OIR notes that many insurers do not pay policyholder dividends, which supports not including a policyholder dividend component in the rates. NCCI also selected an investment yield at a historically low mark. Nonetheless, because the filing indicated a much larger profit and contingency factor, substituting other values still showed the 2.5% profit and contigencies factor to be reasonable.
The OIR expressed concern with a 40% differential between the largest and smallest changes by industry group. The OIR found this to be too large a swing, and directed a revised filing to include swing limits of no more than +/- the rate level change by industry group. The OIR also directed that there be no change to the roofing rate based on testimony presented at the public hearing about potential decreased availability if the roofing rate decreases. The OIR directs NCCI to submit a revised filing by October 28, 2010 in order to meet a January 1, 2011 effective date.