Florida Reforms Put WC Market On The Mend

New carriers entering the market validate changes, carriers and buyers contend

Carrier and employer groups said the willingness of companies to enter the market validated their support for the 2003 reforms and their opposition to any major changes this year.

"We're not quite ready for the seventh-inning stretch, but we're pleased and encouraged with the number of workers' comp insurance companies stepping up to the plate," said Sam Miller, vice president of the Florida Insurance Council.

Reflecting national trends, Florida's market underwent a steep downturn in the late 1990s and early part of this decade. The National Council on Compensation Insurance in Boca Raton, Fla., pointed to several cost drivers, including the fact that the state's permanent total disability rate was five times the countrywide average. Other studies showed that the state's medical costs were rising along with litigation expenses, which were being driven in large part by claimant attorney fees.

Due to the negative trends, many of the state's largest carriers stopped writing new business or nonrenewed thousands of employers.

Faced with a lack of available and affordable coverage, employers created political pressure on lawmakers to pass a reform bill highly favorable to insurance buyers and carriers including limits on attorney fees and a substantial revision in the definition of permanent total disability to make it more difficult for workers to qualify for benefits.

As a result, state regulators subsequently approved an across-the-board 14 percent rate decrease late last year.

While it is still too early to fully appraise the impact of the 2003 reforms, there is some evidence to suggest the market is on an upward track.

For example, in March, the number of new policies issued was up 28 percent over the same period last year. In a development that could have a rippling effect through medical and indemnity costs, there is also hard evidence that the changes in benefits and attorneys fees are reducing the amount of litigation.

NCCI reported that before the October 2003 effective date of the new law, the number of petitions for benefits filed equaled roughly 13,000 a month. In the months following the law change, however, that number dropped to 9,000.

A more telling statistic showed that the number of new cases filed is down. Prior to the reforms, the number of new cases filed monthly was around 8,000. Following the reforms, however, the number of new cases fell to 4,000 a month.

Still, the largest statistic that matters is the willingness of new carriers to enter the market. Steve Birtman, state director for the National Federation of Independent Businesses, said small businesses are thrilled to have new choices in the workers' comp market. "It has gotten a little easier over the last few months as the market is not as tight as it was," he said. "The 2003 law was very important in the recovery of the market, and I am hopeful it will continue to get better."

Insurance agents confirm the market has eased for some, but caution that the small-business market will take longer to rebound. "It's still very tough on new businesses," said Bruce Taylor, a Fort Lauderdale insurance agent with Setnor Byer Risk and Insurance.

Mr. Taylor, president-elect of the Florida Association of Insurance and Financial Advisors, said most insurers are still requiring companies to show they have at least two years prior experience with workers' comp coverage.

"The new small guy still has got trouble," he said. "Trying to find a carrier for them is like looking for a needle in a haystack."

Reproduced from National Underwriter Edition, August 19, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.