1 presented by jim watford, actuary office of insurance regulation, department of financial services...
TRANSCRIPT
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Presented by Jim Watford, Actuary
Office of Insurance Regulation, Department of Financial Services
2003 CAS Spring Meeting - Marco Island, FloridaMay 19, 2003
An Overview of Florida’s Workers Compensation
Market
2
Typical Hard Market Characteristics
Compare the Typical Hard Market Characteristics to the Florida Market
Florida Workers’ Compensation JointUnderwriting Association (FWCJUA)
Professional Employer Organizations PEOs
Overview of Presentation
3
Typical Hard Market Characteristics
Deterioration of Experience
Loss Ratios, Combined Ratios, Dividends, Investment Income
Rate Increases
Growth in Residual Market
4 2 0 0 3 N a t io n a l C o u n c i l o n C o m p e n s a t io n I n s u r a n c e , I n c .
F L W C O v e rv ie w 5 /0 32
B a s e d o n F lo r id a d a ta t h r o u g h 1 2 /3 1 /0 1 .
- 1 .9
- 3 .2 - 3 .3
- 4 .4- 3 .9 - 4 .0
- 7 .5
- 4 .8
- 1 .9
- 3 .5
- 6 .8- 6 .6- 8
- 6
- 4
- 2
0
9 0 9 1 9 2 9 3 9 4 9 5 9 6 9 7 9 8 9 9 0 0 0 1
C a le n d a r Y e a r
Pe
rce
nt
I m p a c t o f D iv id e n d so n P r e m iu m in F lo r id a
5 2003 National Council on Compensation I nsurance, I nc.
FL W C Overview 5/033
127% 129% 128% 124%118%
20%
60%
100%
140%
1997 1998 1999 2000 2001
Accident Year
Florida Accident Year Combined Ratios
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123% 125% 121% 117%111%
20%
60%
100%
140%
1997 1998 1999 2000 2001
Accident Year
Florida Accident Year Combined Ratios Excluding Dividends
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Florida’s Manual Rate Changes
-25.0
31.2
7.2
-10.6 -11.3
-2.1
1.5 2.50.0
12.9
2.7
-30
-20
-10
0
10
20
30
40
No Filing
9/90 1/92 1/93 1/94 1/95 1/96 1/97 1/98 1/99 1/00 1/01 8/02 4/03
Effective Date
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Florida’s Cumulative Rate Level Since 1/90
-25.0
5.5
-5.7 -5.7 -5.7
-16.4-18.1 -16.9
-14.8 -14.8-12.5
-1.2-1.6
-30
-25
-20
-15
-10
-5
0
5
10
No Filing
9/90 1/92 1/93 1/94 1/95 1/96 1/97 1/98 1/99 1/00 1/01 8/02 4/03
Effective Date
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FWCJUA Written Premium
05,000,00010,000,00015,000,00020,000,00025,000,00030,000,00035,000,00040,000,00045,000,00050,000,00055,000,00060,000,00065,000,00070,000,00075,000,000
'94 '95 '96 '97 '98 '99 '00 '01 '02
WrittenPremium
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Why are companies restricting writings in Florida?
Reinsurance
Terrorism
Investment Returns
Inadequate Rates?
Policyholders and Brokers are being given vague reasons like “underwriting” or “home office decision”
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Florida Workers’ Compensation Joint
Underwriting Association (FWCJUA)
History of Creation
1980’s – 1990’s background
1993 Special Session
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Unique Characteristics of FWCJUA
No assessments to insurance companies
Policyholders are assessable in sub-plan “C”
Use and file rating, disapproval prospective only
Not for Profit Florida Corporations
Subject to supervision of a 13 member Board: 5 domestic insurers representatives5 foreign insurers representativesAgent Association representativesConsumer AdvocateChair
Covers only Florida Exposure
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Premium Determination for FWCJUA
FWCJUA manual rates are much higher than the voluntary market rates.
Sub-plan “C” premiums are surcharged 99% on any amounts over $2,500.
Flat surcharge of $475 applies for all policies.
Assigned Risk Adjustment Program (ARAP) surcharge applied to experience rated risks
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Expense Constant higher than Voluntary Market.
Premium discount does not apply.
Standard classification and rating
rules apply.
Assessable policies issued to sub-
plan “C” policyholders.
Premium Determination for FWCJUA
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FWCJUA Manual Rate to Voluntary
0
0.5
1
1.5
2
2.5
3
3.5
'94 '97 '99 7/1/2000 '02
Differential
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FWCJUA Manual Rate Divided by the Voluntary Rate
Date Differential4/1/2003 1.4291/1/2002 2.5346/1/2001 2.1647/1/2000 2.1601/1/2000 3.1721/1/1999 3.2781/1/1998 2.2101/1/1997 1.7509/1/1995 1.4501/1/1994 1.260
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A Professional Employer Organization is an organization that provides an integrated and cost effective approach to the management and administration of the human resources and employer risk of its clients, by contractually assuming substantial employer rights, responsibilities, and risk and, through the establishment and maintenance of an employer relationship with the workers assigned to its clients.
Definition from National Association of Professional
Employer Organizations (NAPEO)
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Other Types of Employment Services
Temporary Staffing
Payrolling
“Facilities management” or “outsourcing”
Human Resources Services
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Is the organization the employer for workers’ compensation purposes?Statutory provision in Florida (section 468.529, F.S.) provides that a licensed employee leasing company is the employer of the leased employee.
Case Law has established that the client company is co-employer and has immunity from suit under workers’ compensation exclusive remedy.
If the PEO/Leasing Company fails to provide the workers’ compensation benefits due to lack of coverage or insolvency of PEO, the client company may still be responsible for the workers’ compensation benefits.
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DOI first became aware of employee leasing in late 1980’s.
Mid 1990’s – Employee Leasing became mainstream. Routinely written by major carriers.
Late 1990’s some retraction in market.
CNA became a major writer in Florida by 2002. Reportedly writing 70% of PEO market.
PEO/Employee Leasing – History in Florida
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Mid-2002 - CNA notifies agents and PEOs that they will non-renew all PEO business.
PEOs have been scrambling to find
or create a market outlet.
PEOs are buying insurance
companies.
Three Insurance Companies have been recently licensed that will specialize in PEOs.
PEO/Employee Leasing – History in Florida