2016 Workers’ Compensation Combined Ratio is a 94 per NCCI


It has been a busy month of conventions… NAPEO Legal and Legislative, RIMS and last week the NCCI.  On the ground at the PACE conference in New Orleans, a look back at the NCCI AIS.

The National Council of Compensation Insurance (“NCCI”) Annual Issues Symposium is the preeminent conference for understanding all things workers’ compensation.  Industry experts in the carrier, reinsurance and brokerage communities converge in Orlando every year in May to better understand the meaningful trends in the workers’ compensation line of insurance. The most meaningful number of this year’s event was 94… the lowest combined ratio of any other year since 1990 with the exception of 2006 (93).  It should also be noted that this is a 6 point drop from the 100 of last year and represents one of few years <100.

Based on typical patterns, this is now where capital enters the market… which was illuminated when the NCCI literally sold out of tickets.

With NAPEO’s Legal and Legislative Conference two weeks ago, the NCCI conference last week and PACE in New Orleans this week… it has been a high school reunion of sort – seeing good friends, telling old stories and commiserating on how to make the PEO industry the optimal platform for American business.  Health insurance maybe in the news every day but workers’ compensation is the line of business that PEO’s must have.

The origination of the PEO Compass was to provide an executive summary of all things workers’ compensation and how they impact all things PEO.  The NCCI is a huge driver of this nationwide and sets rates and rules in 37 states.  The document attached is a must read for those like me that are workers’ compensation and data geeks.


For those that are not (or would prefer not going through 57 slides), the highlights below:

  • The total P/C industry’s 2016 combined ratio (101%) represents a three-point increase versus that for 2015.
  • Combined ratios increased in all lines of business except workers compensation (slide 4)
  • Premium for the NCCI-serviced Residual Market Pools has remained stable over the last four policy years, at approximately $1.1 billion. (slide 12)
  • Between 2015 and 2016, countrywide private carrier direct written premium grew +2.4% (slide 15)
  • The percentage change in payroll (+4.5%) is approximately equal to the percentage change in the average wage (+2.5%) plus the percentage change in employment (+1.9%).  Employment grew at an above-average rate for the Professional and Business Services; Education and Health Services; Construction; and Leisure and Hospitality sectors.  Employment in the Manufacturing sector was flat, while the All Other sector posted a decrease primarily due to declines in Natural Resources and Mining employment (slide 17)
  • NCCI workers’ compensation filings with effective dates in 2017 averaged –6.7%… California and New York are already seeking approval for rate decreases which are not even part of this data set (slide 18)
  • In 2013, more than 70% of respondents saw an increase in premium at renewal, but by the fourth quarter of 2016, 62% reported seeing a decrease in premium at renewal (slide 23)
  • The workers compensation 2016 calendar year combined ratio for private carriers was 94%. This is the second consecutive year that the industry has posted a six-point underwriting gain. Consecutive combined ratios at this level have not been seen in at least the last 30 years (slide 24)

What this means is that workers’ compensation has become a very sexy line of insurance risk-bearers.  With favorable improvements in operating and investment performance, the median expected rate of return is +20%.  Again, it is therefore no surprise that this years NCCI AIS conference was sold out months prior to the event.

For those that happen to be in New Orleans this week for the annual PACE conference, let’s meet up and strategize in person about the great opportunities ahead for the industry.

– Paul R. Hughes

c: 321.217.7477

e. phughes@libertateins.com



California Workers’ Compensation Rates About to Drop in July


Last Thursday, the Workers’ Compensation Insurance Rating Bureau of California (“WCIRB”) testified before the California Department of Insurance that a 16.5% rate reduction was appropriate for the businesses of California effective 7/1/17.  California is a state where rates do not follow anniversary rating dates (“ARD’s) and therefore the impact of this reduction will be immediate for those that shop.

“WCIRB Executive Vice President and Chief Actuary Dave Bellusci and with President and CEO Bill Mudge presented the actuarial basis for the WCIRB’s average proposed July 1 advisory pure premium rate of $2.02, which is 16.5 percent lower than the corresponding industry average filed pure premium rate of $2.42 as of Jan. 1 2017 and 7.8 percent less than the insurance commissioner’s approved average Jan. 1 advisory pure premium rate of $2.19.”


A fertile market for aggressive carriers.

The California Department still has to approve, but that is anticipated in the next 30 days with the effective date of the proposed reduction less than 60 days from today.

While this is a sharp reduction, California still has and will have the highest workers’ compensation rates in the country by far and the State represents approximately 1/3 ‘rd of all workers’ compensation insurance premiums countrywide.  A fertile market for aggressive carriers.  For more info on national State rates and how they compare before credits/dividends and deductibles, review the following link…


-Paul R. Hughes

California Adopts 16.5% Workers’ Compensation Rate Drop for 7.1

From the Insurance Journal…


California chose to adopt the Workers’ Compensation Insurance Rating Bureau’s (“WCIRB”) recommendation of a -16.5% drop in pure premium rates.  It should be noted that these rates are advisory only and so what to watch next is who adopts the pricing decrease and who does not.  With over 30% of all US workers’ compensation premiums generated out of California, this will provide an intriguing battleground and opportunity for those carriers that buy into WCIRB’s numbers in regard to lower medical loss development, decreasing indemnity claim frequency, and lower than projected loss adjustment expenses.

– Paul R. Hughes


New York Workers’ Compensation Rates Expected to Fall 4.5%

Mr. Cuomo has committed to a workers’ compensation “business process reengineering” aimed at increased efficiencies in the overall system.  This from the Insurance Journal today.

At the same time, improvements in medical delivery is also part of the budget in areas such as:

  • Expanding the safety net for seriously injured workers, so more are eligible to apply for reconsideration for lifetime benefits when their benefit caps are set to expire.
  • Ensuring injured workers who are out-of-work and not receiving benefits will get a hearing within 45 days.
  • Providing relief for first responders exposed to extraordinary stress in emergency situations.
  • Strengthening the administrative tools available to the Board in its efforts to provide swift and appropriate delivery of benefits to injured workers.

If the recommendation from the New York Compensation Insurance Rating Board is approved (which is likely), the new rates will take effect on 10.1.17.

  • Paul R. Hughes

New York Board Proposes 4.5% Workers’ Compensation Rate Decrease

New York businesses could soon see some slight relief in workers’ compensation premiums, according to an announcement from Gov. Andrew M. Cuomo.

The governor’s office released a statement Monday saying that the New York Compensation Insurance Rating Board, a non-governmental rate service organization, has submitted an overall workers’ compensation rate decrease of approximately 4.5 percent for rates beginning Oct. 1, 2017. If approved, the premium decrease equates to a savings New York employers about $400 million this year in workers’ compensation premiums.

In its rate filing, CIRB attributed the reduction in premium rates to certain cost savings measures passed as part of the 2018 budget and general system savings spearheaded by the New York State Workers’ Compensation Board, according to the governor’s statement.

“The reforms to the Workers’ Compensation system in this year’s budget will help New York businesses cut costs – enabling them to further reinvest, grow and create more jobs across the state,” Cuomo said. “With this rate decrease, New York is providing real savings to businesses helping to make them more competitive while strengthening protections for injured workers at companies across the state.”

The rate submission must still be reviewed and approved by the Department of Financial Services. If approved it would become effective October 1, 2017.

New York Senate Majority Leader John J. Flanagan said workers’ compensation reforms were part of the budget negotiations earlier this year.

Workers’ compensation premium rates are determined on an annual basis and take into account recent claims experience as well as implementation of any new policies and procedures. The 2018 New York Budget specifically addresses cost by applying limits to temporary disability payments prior to a permanency award, while providing an exemption process for the most seriously injured.

“Governor Cuomo and the Legislature have successfully managed to rebalance the workers’ compensation system to provide better protections for injured workers and provide much needed relief to New York’s businesses,” said Kenneth J. Munnelly, chair of the Workers’ Compensation Board.

The budget also includes better protections for injured workers by:

  • Expanding the safety net for seriously injured workers, so more are eligible to apply for reconsideration for lifetime benefits when their benefit caps are set to expire.
  • Ensuring injured workers who are out-of-work and not receiving benefits will get a hearing within 45 days.
  • Providing relief for first responders exposed to extraordinary stress in emergency situations.
  • Strengthening the administrative tools available to the Board in its efforts to provide swift and appropriate delivery of benefits to injured workers.

The budget requires the Workers’ Compensation Board to publicize new permanent impairment guidelines to reflect advances in modern medicine that result in better outcomes. Additionally, to ensure that injured workers receive high quality, cost effective medications, the board will establish a prescription drug formulary.

According to the governor’s office, the reforms build on his continued commitment to improve New York’s workers’ compensation system to more effectively serve the needs of injured workers and employers.

Signed by the Cuomo as part of the 2013-14 budget, the Business Relief Act provided hundreds of millions in savings for New York businesses by fundamentally restructuring the way that workers’ compensation assessments were made.

Cuomo also launched a comprehensive “business process re-engineering” to re-imagine the workers’ compensation system. As part of that effort, the Workers’ Compensation Board is close to launching virtual hearings, which will modernize and virtualize the Board’s present hearing environment and allow injured workers to participate in a hearing at a location that is most convenient for them, even their home, the statement said.

In addition, the Workers’ Compensation Board has developed new processes to ensure benefits are delivered more timely by utilizing alternative means to resolve disputes. This allows the board to preserve hearing time for more complex cases with legal disputes. The board has also generated a dramatic decline in inventory of pending workers’ compensation appeals and the length of time it takes for those appeals to be resolved. The prompt processing of appealed claims aids both workers and employers, by making benefits and treatments available more quickly and lowers litigation costs.

Source: New York Office of the Governor

Florida Workers’ Compensation Rates Get No Legislative Relief

There will be a certain increase in Florida workers’ compensation rates this coming year as the Florida legislature failed to pass anything to address the Castellanos and Westphal cases that lead to a 14.5% rate increase on 12.1.16.  The 14.5% was at the low end of the range that NCCI used in recommending n increase.

  •  Paul R. Hughes

Florida Fails to Pass Workers’ Compensation Reform

Florida businesses shouldn’t expect relief for workers’ compensation rates, this year at least. The Florida Legislature failed to pass legislation this session addressing 2016 decisions by the Florida Supreme Court that sent the state’s workers’ comp system into disarray and led to a rate increase of 14.5 percent.

After much back and forth between the House and Senate over their respective bills, it came down to attorney fees, which the industry says are to blame for the majority of the rate increase.

Lawmakers sought to reform the state’s workers’ comp system through two bills – House Bill 7085 and Senate Bill 1582 – in response to decisions by the Florida Supreme Court that found aspects of the Florida Workers’ Comp Act unconstitutional.

[Lawmakers also failed to pass other closely-watched insurance reforms addressing insurance claims (assignment of benefits) abuse. Read more on the failed AOB legislation.]

Debate over the Senate and House bill went on throughout the final legislative day on Friday with the House, in an attempt to lure the Senate to its side, passing an amendment capping attorney fees at $180 an hour on approval by a judge of compensation claims. The Senate version of the bill capped attorney fees at $250 an hour versus the House’s previous $150 an hour cap. On Friday, the Senate voted not to lower the cap in its bill to $200 an hour, but the House still tried later to compromise with the $180 cap.

Another key difference in the Senate version was a provision moving Florida to a loss-cost system. Rep. Danny Burgess, who sponsored the House bill, told House members “the jury’s still out” on whether a loss cost system leads to a premium reduction, based on data from states that had switched to this model.

Burgess said he hoped the Senate would agree to the attorney fee compromise so lawmakers could get “something across the finish line.”

“The bill, as it stands today is on the end of the rope,” he told House members Friday. “[We are] trying to provide substantial reform to address rising rates from recent court decisions…We have to solve this problem before us. Every small business in the state of Florida is watching us now.”

The Florida Supreme Court’s decisions that caused the upheaval came in two cases – Castellanos v. Next Door Company and Westphal v. City of St. Petersburg. The biggest cost driver behind the 14.5 percent rate increase, according to the National Council on Compensation Insurance (NCCI), was Castellanos. That decision found the state’s mandatory attorneys’ fee schedule for workers’ compensation cases eliminated the right of a claimant to get a reasonable attorney’s fee — a “critical feature” of the workers’ compensation law. The impact of the Castellanos decision equaled 10.1 percent of the 14.5 rate increase, while Westphal accounted for 2.2 percent.

Burgess said the House version could offer up to a 5 percent reduction in rates and the Senate’s version would offer only about a 1 percent reduction.

The insurance industry supported the House version, agreeing that attorney fees are the main cost driver behind rate increases. The Property Casualty Insurers Association of America (PCI) said the bill would have addressed “decisions by the Florida Supreme Court rulings that could cause workers compensation rates to increase by 14.5 percent in the state, costing Florida job creators more than $1.5 billion.”

But ultimately, the two branches couldn’t reach an agreement before time ran out for lawmakers on Friday night.

Florida businesses now have the rate increase to contend with and the possibility of additional rate increases next year. An actuary from NCCI told the Florida House at a hearing last month that it is reasonable to expect that there would be continued pressure on rates without legislative reform.

The Florida Chamber of Commerce called lawmakers’ failure to enact reform a “failed fix to Florida’s broken workers’ comp system” and said it was a missed opportunity by lawmakers to make Florida more competitive.

Court Rules Florida Workers’ Comp Rate Hike to Remain, For Now

Today’s article out of Insurance Journal provides us with a timetable to the hopeful conclusion of the 12.1.2016 Florida workers’ compensation rate increase saga.  The approved 14.5% rate increase that was challenged based on Sunshine Law infractions and then temporarily upheld upon OIR and NCCI appeal of the decision.


“NCCI and OIR filed motions on Dec. 5 and Dec. 8, respectively, seeking to stay the order on appeal and also granted their request to expedite the appeal process. In the Dec. 12 ruling, the appeals court ordered that the record on appeal must be filed on or before Dec. 30, 2016, and the initial briefs are due on or before Jan. 11, 2017. The answer brief must be filed no later than Jan. 23, 2017 and the reply brief will be due no later than Feb. 2, 2017.”

There can be no firm expectation outside of all briefs are due to the courts by February 2, 2017 and a ruling assumed to be made thereafter.  Either the courts rule in favor of the NCCI and OIR and the 12/1/2016 proposed rate sets of +14.5% stay in place… or deny the appeal and all carrier rate sets go back to those in-force and approved for 1/1/2016.  Undoing this rate change at minimum 60+ days after taking effect will be messy at best for those of us administering policies and providing pricing consultation.  We shall see —

  • Paul R. Hughes

Correction to Florida 12.1 Workers’ Compensation Rates Now in Effect

In my zeal in getting the Florida 2016.17 workers’ compensation rate “soap opera” to end, I suggested that the FL OIR appeal dealt with the conclusion for Florida workers’ compensation rates from 12.1.06 and beyond.  It has not.

Impact is the same, but outcome in flux in terms of if the 12.1.16 rates will be upheld or not upon the OIR appeal.  No current understanding of when this appeal happens or process thereof.

Thankfully, I have friends who are lawyers and lobbyists that do this for a living and understand the legal system whom have corrected me and thus wanted to pass on to you.


This is a detailed link that provides what I would consider some of the most salient points to consider as this journey towards finality continues:

“On the day before Thanksgiving, Leon County Circuit Court Judge Karen Gievers ruled that the rate increase negotiated between the National Council on Compensation Insurance (NCCI), which represents insurers, and the state regulators within the Office of Insurance Regulation (OIR), cannot go into effect and that NCCI must turn over documents requested by the plaintiff in the case.”

“The Sunshine Law challenge was brought by James Fee, a Miami attorney who represents injured workers. Fee claimed, and the judge agreed, that NCCI was in violation of the Sunshine Laws in holding “multiple, non-public, secret meetings” internally and with the OIR over the rates.”

…and then this story from Pensacola Business Journal that brings some clarity to the OIR appeal, but not much more then that…


“A 14.5 percent increase to state workers’ compensation rates will take effect Dec. 1 after the Florida Office of Insurance Regulation filed an appeal to a ruling that would have voided the rate hike.”

– Key words here are “would have voided” or I may have used may void if appeal is not won by OIR.  

“The increase occurs after the OIR filed a notice of appeal with the First District Court of Appeal Monday. It came in response to a court order from Circuit Judge Karen Gievers of Leon County Nov. 23 that voided the increase.”

–  So as I understand it then, the carriers are rolling out the 12/1 rate sets based on the OIR appeal holding the Gievers judgement in check.  The appeal itself allows this, but it has not been heard yet.  Not sure the length of this appeal process, whether NCCI will file a secondary 1/1 rate filing just in case, or most importantly, what this means over the next twelve months to the Florida workers compensation cost basis for PEO and overall business. 

I jumped the gun in yesterday’s post.  The impact of the appeal being filed is that, as of now, the rate increase scheduled for 12/1 is going into effect.  However, the matter is not finally determined, as the appeal is still pending.  Such an important fiscal event where the outcome is unknown for an unknown period of time.  As they say, NEWS at 11… And more as we understand where this goes next.

  • Paul R. Hughes