 ON THE MEND: Workers' comp rates have dropped more than 32% since 2003. |
The number of workers' compensation carriers writing business in Florida fell from 248 in 2000 to 235 in 2002, according to the Florida Office of Insurance Regulation. With the Florida Legislature's passage of the landmark reform legislation in 2003, the trend reversed, with the number of carriers jumping to 241 in 2003 before falling back to 234 in 2004.
Although the 2003 workers' compensation reforms, which addressed permanent total disability and attorney fees among other things, have made the Florida market healthier, some issues linger. Challenges to the provision that places limits on attorney fees in some workers' compensation cases remain in the courts. "If the courts rule against (the limits), all bets are off," says Sam Miller, executive vice president of the Florida Insurance Council.
Another issue is how to finance a $4.8-million deficit in the Florida Workers' Compensation Joint Underwriting Association's Subplan D, a self-funded pool set up in 1993 for businesses unable to get insurance through commercial insurance carriers. The total deficit is actually almost $20 million, but $15 million will be financed from the Workers' Compensation Administrative Trust Fund. Options for the remaining $4.8-million deficit include an additional transfer from the trust fund -- although Gov. Jeb Bush vetoed a similar strategy in 2004 -- or an assessment on all workers' comp policyholders except for individual, self-insured firms. Says Miller, "That has to be dealt with one way or another."
Issues to Watch:
Florida's Motor Vehicle No-Fault Law. Watch for a debate in Tallahassee over personal injury protection (PIP) fraud as the Legislature decides whether to repeal or modify the no-fault law.
National Catastrophe Fund. The administration of Gov. Jeb Bush and state leaders from California, New York and Illinois are urging Congress to set up a fund to cover major disasters, such as hurricanes, floods, earthquakes and other events, not including terrorism. Consumers would pay premiums for coverage under the proposal.This month a 13.5% reduction in workers' compensation rates goes into effect, meaning that rates have dropped 32.6% cumulatively since 2003. "The reform that took place in October 2003 was a tremendous benefit," says Gary Harvey, head of the Florida office for the PMA Insurance Group, which moved into the state just as reforms were enacted.
 BRUCE DOUGLAS |
BRUCE DOUGLAS
Chairman, Citizens Property Insurance Corp., Tallahassee
Bruce Douglas, 71, will have his hands full in his first full year leading the board of directors of Florida's state-run insurer of last resort, Citizens Property Insurance Corp., which provides coverage for nearly 800,000 customers in high-risk areas. In 2005, the insurer was plagued with charges of ethical lapses by some of its executives. A bigger issue -- one that will continue this year -- is the weight of financial losses put on Citizens after eight hurricanes in two years. Douglas is CEO of Douglas Capital Management, an investment firm in Ponte Vedra Beach.
Q&A with Rade Musulin
No Knee-Jerk Reactions, Please
Another busy hurricane season in 2005 has meant more calls for legislative fixes to the insurance market. Actuary Rade Musulin, vice president of operations for Florida Farm Bureau Insurance Cos., says not so fast. The state catastrophe fund, as intended, has stabilized the market. And while Citizens Property Insurance Corp., the state's insurer of last resort, will have to levy assessments on all policyholders in Florida -- whether insured by Citizens or not -- to cover the bill from 2004, at least the claims will be paid.
Florida Trend: So what should Florida's response be to this latest season?
 RADE MUSULIN |
FT: What do you think of proposals to create a state windstorm equivalent of federal flood insurance?
RM: There's no economic need for that to happen. There's no silver bullet, and that proposal has some serious issues with it. Where are we going to get the money to pay the claims? Is it in our interest to basically run the private capital out of the market and rely on state resources entirely? It's a double-edged sword. If the state is issuing the policies, the state is taking the risk. It's easier for them to have a standard policy. It's easier to say we're not going to change the price regardless of what happens (in the reinsurance market). In order to achieve that stability, you lose a number of things. Sometimes the market says no. The market says a house not built well pays more. The market makes tough choices. The thing the private market brings to the table is basically putting a price on risk. If you engage in risky behavior or if you chose to live in a risky place, you're going to pay for that in any private system. That has a very strong benefit to the consumer in the long run because it will identify loss and reduce loss. The problem with government taking it over is that the government in many ways has a hard time making risky people pay for their risky behavior. That can turn into a situation where you run massive deficits, overdevelopment, then a bigger loss 10 to 20 years down the road than you would otherwise have.
FT: What about the growth in the number of policies in Citizens?
RM: It's like the canary in the coal mine of the market. When Citizens gets big, to me that says for whatever reason the private market feels it's not getting enough revenue to justify the risk, so therefore they're going into Citizens.
