News & Updates


Workers Comp Excess Profits Law Slated for Rescission

Workers Comp Excess Profits Law Slated for Rescission

The legislature passed a bill (HB 941) that included a provision eliminating the excess profits calculation for workers’ compensation and employer’s liability insurance.  The excess profits provision, currently located at section 627.215, Florida Statutes, requires insurers to report their premiums, losses and expenses in the affected lines of business by July 1 of each year.  For workers’ compensation and employer’s liability insurance, the reported data results in a determination of whether the insurer’s profits over the preceding three-year period have exceeded the anticipated underwriting profits in its rate filings by more than five percent.  Any profits in excess of this amount are subject to refunds to policyholders.

 The proposal to eliminate the excess profits calculation arose in the House of Representatives.  No companion bill was filed in the Senate.  Supporters of the reform argued that the excess profits law is outdated and originated when Florida had a different system for compensating injured workers.  They also urged that repealing the excess profits provision would be a positive signal for the Florida market, ultimately leading to more competition.  The amount of excess profits returned over the course of the law’s existence has been relatively modest in relation to the aggregate premiums, so the law serves as a regulatory deterrent without much corresponding benefit to consumers.  Supporters also mentioned that Florida is one of only four states with such a law.

 The primary opposition to the proposal came from the trial lawyers, who argued that the proposal would take money away from small businesses.  However, Florida’s major business groups supported the reform because they believe the benefits of a better regulatory climate are more beneficial in the long run.

 Although the House proposal seemed to be stalled without a companion in the Senate, it was added as an amended to another bill that moved through both chambers.  Assuming the bill becomes law, it takes effect July 1, 2012.

 The legislature previously carved commercial property, commercial casualty and commercial umbrella liability insurance out of the law effective January 1, 1997.  If the current bill becomes law, it will not apply to any lines of business.  Florida still will have an excess profits provision for residential property insurance at section 627.06291.  However, the triggers for that provision would require an insurer to earn, over the course of 10 years, profits exceeding its anticipated underwriting profit by amount exceeding 10% of earned premium, and excess profits refunds must be made only if the insurer’s surplus exceeds the amount of its 250-year PML.