Controlling Workers Comp Rates in Florida
Recently, the Florida regulators announced an upcoming rate decrease for Workers’ Comp policies to be written in 2020. In general, this was met with enthusiastic support by consumers. I to had some excitement mixed with some concern as the announcement was reminiscent to me of other failed Workers Comp rate reductions in other States. We hope, that the reduced rates are based upon sound actuarial numbers & are not politically motivated.
Obviously, politically, it sounds good to say you slashed prices. There were several notable cases where tough talking politicians demanded big decreases in Workers Comp Rates only for the efforts to backfire. In 2007 then Governor Eliot Spitzer of New York touted comprehensive Workers’ Compensation reform where rates were slashed. Loss experience as a whole was not improving. His rationale for this move was to “limit” payouts for New York State Workers Compensation claims. It was a sound argument. Except the courts continued to payout awards that surpassed the new guidelines. This resulted in double digit increases to make up the shortfall in the states coffers.
An almost identical scenario occurred in with California Workers Compensation. The result was the same. When the shortfall was huge; the State was forced to take gigantic increases to make up the missing money.
Florida is seeing ever increasing legal costs associated with policies that are paid out. Further, “attorney fees associated with Workers Comp disputes continues to increase.” However, loss experience for the actual claims have been lower. What remains to be seen is if these lower losses are sustainable which will determine if the reductions will stick. The aforementioned failed reductions were both executed by very liberal political fronts. That is not the case in Florida, hopefully, they remained “conservative” with their actuarial numbers.