florida 1/1/2015 workers compensation rate filing · office & clerical –2.1% –59.1% goods...

© Copyright 2014 National Council on Compensation Insurance, Inc. All Rights Reserved.

Florida 1/1/2015Workers Compensation Rate FilingKirt Dooley, FCAS, MAAAOctober 14, 2014

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1.702 1.569 1.794 2.013 2.2970.106 0.034

0.0430.060

0.0790.8730.765

0.6490.790

0.8342.6812.368 2.486

2.8633.210

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2009 2010 2011 2012 2013p

Private Carriers Group Self‐Insureds Individual Self‐Insureds

Florida’s Workers Compensation Premium Volume

Direct Written Premium$ Billions

p PreliminarySource for Private Carriers: NAIC Annual Statement data, state page, line 16—Workers Compensation

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Florida’s Historical Rate Changes

-14.0

0.0

-5.1

-13.5-15.7

-18.4 -18.6

6.4

-6.0 -6.8-4.2

7.8 8.96.1

-0.7

0.7

-3.3

-35.0

-25.0

-15.0

-5.0

5.0

15.0

25.0

Percent

No Filing

Cumulative 10/2003–1/2015: -57.5%

Calendar Year

EmmaMurray-Related

*Pending

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Current Average Voluntary Pure Loss Costs Using Florida’s Payroll Distribution

2.62

1.69

1.30 1.220.99

1.41

1.09 1.12 1.12 1.11 1.02 0.95

0

1

2

3

FL AL GA NC SC TN

Pure

Los

s C

ost—

All

Cla

sses

State2003 2014

Based on the latest NCCI approved rates and loss costs in the various states

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© Copyright 2014 National Council on Compensation Insurance, Inc. All Rights Reserved. 5

Workers Compensation Premium Rate Ranking

Premium Rate Index per $100 of Payroll

0.88

1.82

3.48

0.0

1.0

2.0

3.0

ND IN AR MA VA NV UT DC WV OR CO KY KS MS AZ TX MD MI OH GA WY NE AL FL HI NC SD IA WI TN MONM RI MNWA SC PA ID ME NH MT LA DE VT IL OK AK NY NJ CT CA

Source: 2014 Oregon Workers’ Compensation Premium Rate Ranking SummaryIndexes based on rates in effect on January 1, 2014

FL Ranking24th lowest (out of 51)


Florida January 1, 2015Workers Compensation Filing

Summary of Proposed Rate ChangeComponent ImpactChange in Loss Experience –2.9%Change in Trend –2.3%Change in Benefits –0.8%Change in Production & General Expenses +0.7%Change in Loss Adjustment Expense –0.7%Change in Profit & Contingencies +2.9%Change in Taxes and Assessments –0.1%Total Average Rate Change –3.3%

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Proposed Change1/1/2015

Cumulative Change** 10/1/2003 – 1/1/2015

Manufacturing –4.0% –55.7%

Contracting –3.7% –59.2%

Office & Clerical –2.1% –59.1%

Goods & Services –3.4% –55.9%

Miscellaneous –3.2% –55.6%

Overall Average –3.3% –57.5%

Florida January 1, 2015 Workers Compensation FilingChanges by Industry Group*

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*Changes by industry group are preliminary estimates**Cumulative changes assume full approval of 1/1/2015 filing




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Experience Period

Two policy years are again used as the experience base in this year’s filing This is consistent with the last three filings

Policy year data reflects a more accurate matching of losses and premium

Use of two calendar-accident years would have resulted in a change of –3.4%

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Loss Development

Average of paid and paid + case loss development Consistent with previous Florida filings Neither method clearly superior to the other Makes use of all available information

Three-year average development factors Consistent with last four Florida filings Loss development factors relatively stable

No changes to methodology with a material impact on the overall rate level change

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Trend Summary

The selected trends are based, in part, on a review of observed loss ratios for policies effective after 2003.

Exponential Trend Fits Indemnity Loss Ratio

Medical Loss Ratio

(1) 5‐point (PY 2008‐2012) –1.8% +1.5%

(2) 6‐point (PY 2007‐2012) –1.0% +1.5%

(3) 7‐point (PY 2006‐2012) –0.3% +1.4%

(4) 8‐point (PY 2005‐2012) –1.3% –0.1%

(5) 9‐point (PY 2004‐2012) –2.5% –1.3%

(4) Current approved trend –1.0% +0.5%

(5) Selected annual trend –2.0% 0.0%

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Exponential Trend Fits

‐3%

‐2%

‐1%

0%

1%

2%

3%

Indemnity Loss Ratio Medical Loss Ratio

5‐point6‐point7‐point8‐point9‐pointSelected

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0.0

0.1

0.2

0.3

0.4

0.5

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Loss Ratio

Policy Year

Florida’s Indemnity Loss RatioStandard CoverageAverage of Paid and Paid+Case

Based on NCCI’s financial data developed to ultimate and adjusted to the current level.

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Projected

0.00

0.05

0.10

0.15

0.20

0.25

0.30

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Loss Ratio

Policy Year

Florida’s Indemnity Loss RatioStandard CoverageAverage of Paid and Paid+Case


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Florida’s Medical Loss RatioStandard CoverageAverage of Paid and Paid+Case


0.2

0.3

0.4

0.5

0.6

0.7

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Loss Ratio

Policy Year

16


Florida’s Medical Loss RatioStandard CoverageAverage of Paid and Paid+Case


Projected

0.20

0.25

0.30

0.35

0.40

0.45

0.50

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Loss Ratio

Policy Year

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Florida’s Total Loss Ratio (Excl. LAE)Standard CoverageAverage of Paid and Paid+Case


Proposed Rates

8-Point Exponential Fit

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Loss

Rat

io

Policy Year

The proposed rates assume that future loss experience will improve

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Benefit Change

Revisions to the Florida Workers’ Compensation Reimbursement Manual for Hospitals Service categories affected: Hospital Inpatient Hospital Outpatient Surgical Implants

Estimated impact on medical costs = –1.1% Estimated impact on overall costs = –0.8%

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Profit & Contingencies Provision

In order to generate a total rate of return commensurate with the industry’s cost of capital, the indicated P&C provision is 6.6% Based on an economic internal rate of return

analysis Excludes anticipated policyholder dividends Cost of capital is approximately 10.5%

Targeted P&C provision increased from 2.5% to 4.5% in the proposed filing

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Profit & Contingencies Provision

In past filings, NCCI limited the targeted P&C provision to 2.5% Unprecedented economic conditions have caused

interest rates to remain near historic lows for an extended period This is expected to negatively impact the

insurance industry’s investment income for the foreseeable future

In light of these conditions, NCCI is no longer limiting the targeted P&C provision to 2.5%

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Florida January 1, 2015Workers Compensation Filing Summary Over the past several years, total loss experience

has been relatively stable A stable system still requires minor periodic

adjustments to the average rate level Full approval is important to help maintain stable

rates going forward

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florida 1/1/2015 workers compensation rate filing · office & clerical –2.1% –59.1% goods...

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