Proposed historic drop in Florida workers’ comp rate draws concern

When insurance regulators contemplate the largest workers’ compensation rate cut in history, you’d hardly expect to hear cries of despair from industry.

Yet that’s what happened at a hearing last week at the Florida Office of Insurance Regulation that examined a proposed average workers’ compensation rate decrease of 15.1%. The new rates were recommended by actuaries with the National Council on Compensation Insurance and if approved would take effect Jan. 1.

Florida already enjoys some of the lowest workers’ compensation rates in the country and regulators seemed to be in a self-congratulatory mood at the hearing for bringing much-needed stability to the market and noting that if the new proposal is approved it would mean a more that 70% reduction in rates over the last several years. That’s a welcome change from the late 1990s when contractors saw annual workers’ comp rate increases balloon almost 50%.

In 2003, state lawmakers instituted major reforms in the system that corresponded to national improvements in worker safety, fewer injuries, and more competitive medical care pricing. Beginning in 2003, workers’ comp rates nationally have enjoyed rate declines reaching 14%. In Florida, rates have declined 17 times.

Data for workers' comp rate cut questioned

But members of the state’s roofing contracting business, whose rates would fall by another 22% under the new proposal, said data supporting a further rate cut was flawed and asked the OIC to freeze rates until a better understanding of the current market can be obtained.

“I’m not asking, I’m begging you to freeze rates for roofing classifications,” said Ralph Davis, of Streamline Roofing, in Tallahassee.

Davis and others in the business made the case that the underlying data justifying a rate decrease comes from the COVID years of 2020 and 2021 when claims hit a historic low, and don’t take into account current trends.

“With this proposed decrease in the roofing rates of another 22% on top of the 50.4% decreases that we've had over the last few years, and coupled with the cost of our excess and reinsurance premiums that are skyrocketing, much like those carriers in the property and auto and markets, we have a reason for pause with these large decreases,” said Debbie Guidry administrator for the Florida Roofing and Sheet Metal Self-Insurance Fund.

“Since the reforms passed in 2003 the workers' comp system has been providing stable and available workers' comp and it's our desire to see the uninterrupted stability and availability of coverage," said Guidry, adding, "Therefore, we agree with our Roofing Trade association and ask for consistency and stability in the rates and not the unprecedented 22% decrease that's currently being deliberated. “

“The state has done a great job, although I appreciate the low rates,” said Les Sims, president of Armstrong Roofing and president of the Florida Roofing and Metal Contractors. “At some point the pendulum will swing the other way and the rates will have to increase very similar to the property insurance debacle we have now.”

Increase in claims expected

Sims said the hiring landscape has changed in the last few years and he’s had to hire unskilled, inexperienced workers which could lead to a very different claims experience.

“I believe what the actuaries tell us and what the numbers say but I think it's a little skewed,” he said. “That fact is, we’re going to see a lot more claims over the next year or two due to these unskilled workers.”

Regulators didn’t comment on the requests to freeze rates and concentrated more on the presentation by actuaries and charts showing the historic rate drops and lost-time claims frequency declines. They concluded the market is healthy and potentially improving.

“That seems like it’s absolutely fantastic news,” OIR actuary Greg Jaynes said. “More than a few pistons are firing towards an enhanced workers’ comp environment in need of lower rates.”

The OIR will accept written comments on the proposed rate decrease through Oct. 19 and a final decision is expected soon after, regulators said.

Based on my analysis, the recommended rate from the filing represents what I believe to be the most actuarily appropriate rate,” said Brett Foster, the state actuary. “This rate is supported by data and it represents an estimate of the expected costs. A higher rate would result in additional premium above and beyond the expected costs.”

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].