The National Council on Compensation Insurance said today it will go along with Florida Insurance Commissioner Kevin McCarty's request for a further reduction in workers' compensation insurance rates.
Last week, the commissioner rejected an NCCI proposal for a 13.3 percent rate level cutback for the voluntary market and asked for an amended filing with a decrease of an additional 2.4 percent for a 15.7 percent total.
A statement issued by Lori Lovgren NCCI state relations executive, said NCCI had the option to appeal Mr. McCarty's denial, but "after careful consideration," yesterday the firm submitted an amended filing for the rate he requested which will apply to new and renewal policies on Jan. 1, 2007.
An evaluation of the Office of Insurance Regulation order found there were only two areas of difference in actuarial opinion that had an impact on the rate indication, NCCI said.
The OIR stated that a minus 4 percent lost wage or indemnity payment trend should be included instead of NCCI's proposed minus 3 percent indemnity trend. The rate impact of the difference in the indemnity trend is minus 0.7 percent.
Also, for the calculation of loss development factors, the OIR chose a shorter-term average. NCCI said the methodology that it used was based in part on a longer term average to address volatility. The rate impact of the difference is minus 1.7 percent.
The statistical organization said there were many other areas in which its recommendations were accepted.
It said updates to two NCCI programs are key, namely an update to the premium discount program2 and the remapping of the hazard groups to classification codes.3
Assuming the amended filing is approved as filed, the overall average rate impact at an industry group level would be as follows:
Manufacturing: -15.4 percent for 2007 and -36.6 percent since 2003.
Contracting: -16 percent for 2007 and -41.6 percent since 2003.
Office and Clerical: -16.2 percent for 2007 and -37.5 percent since 2003.
Goods and Services: -15.3 percent for 2007 and -40.2 percent since 2003.
Miscellaneous: -15.7 percent for 2007 and -44.6 percent since 2003.
The total for all groups would be -15.7 percent for 2007, or -40.6 percent since 2003.
Under the proposal, the entry level threshold for premium discount eligibility would be updated. Florida's current program provides premium discounts for standard premiums over $5,000--a benchmark which was set in the early 80s.
Recognizing the growth in policy premium sizes over the past couple of decades, NCCI said it proposes to update the program and raise the initial threshold to standard premiums over $10,000.
The Premium Discount Program is revenue neutral since the rates are currently adjusted to fund this program. As a result, if the updated threshold is approved, some Florida employers would no longer be eligible for a premium discount and some larger employers would receive lower premium discounts. However, all Florida employers would receive a 2.6 percent rate reduction related to this change, said NCCI.
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