FWCJUA Rates and Forms Committee Meeting Report: June 3
Jun 4, 2008
On Tuesday, June 03, 2008, the Florida Workers Compensation Joint Underwriting Association (â€œFWCJUAâ€) held a Rates and Forms Committee (â€œCommitteeâ€) meeting to discuss the following:
- 2008 Legislative Session Review
- 2008 loss ratio
- A program to eliminate the 2007 Subplan D deficit
- An evaluation of the Actuarial Services Request for Proposal (â€œRFPâ€) and selection
- A review of rates, rating plans and policy forms and their associated application forms
- Reformatting and revision of the Operations Manual
- Possible return of premium dividends
The meeting was called to order by Committee Chairman Rick Hodges, with Brett Stiegel and Charlie Clary in attendance. Also in attendance were FWCJUA Executive Director Laura Torrence, FWCJUA Counsel, and representatives from Deloitte Consulting, LLP, Milliman, Inc. and Towers Perrin.
A 2008 Legislative Session Review was given by FWCJUA Counsel. No major statute changes directly affecting the FWCJUA or workersâ€™ compensation were enacted. To view an update listing ancillary Legislative issues, click here.
After a presentation given by Ms. Torrence on loss ratio booking, the Committee approved FWCJUA standard procedure and confirmed continued use of the 2007 rating tiers.
Ms. Torrence also presented a program to eliminate the 2007 Subplan D deficit. In previous meetings, the Board of Governors (â€œBoardâ€) agreed to submit a plan to the Florida Office of Insurance Regulation (â€œOIRâ€) to eliminate the $3,886,969 Subplan D deficit. FWCJUA staff recommended that the OIR filing be based upon the Subplan D cash flow model that has been updated through May, 2008, and that submission to the OIR be completed by July 14, 2008. The Committee approved the proposed draft letter to the OIR and agreed to submit for Board approval.
A report on the Actuarial Services RFP Response Evaluation was given. The FWCJUA received responses from Deloitte Consulting, LLP, Milliman, Inc. and Towers Perrin. The Evaluation Committee judged that each candidate was well-qualified; and after clarification on the pricing structures offered by each respondent, the decision was made to continue the use of Milliman as the FWCJUA consulting actuary. The decision will be offered for final approval by the Board.
A review of rates, rating plans, policy forms and associated application forms was provided by Ms. Torrence for the following:
Truckers Supplemental Application
Administrative modifications to the Truckers Supplemental Application that would make a transition from FWCJUAâ€™s predecessor, the Florida Workersâ€™ Compensation Insurance Plan, were submitted to the Committee and approved for submittal to the Board for adoption.
Contractorâ€™s Supplemental Application and Employerâ€™s Affidavit
A sole proprietor or owner-operator working as a subcontractor with no employees could cause the entire payroll of a Construction Executive Supervisor or Construction Superintendent to be assigned the highest-rated construction classification code applicable to that policy.
The following modifications to the Contractorâ€™s Supplemental Application and Employerâ€™s Affidavit that would further clarify information needed to complete these forms accurately were submitted to the Committee and approved for submittal to the Board for adoption:
- The statement of the subcontractor who leases employees must include language confirming that 100 percent of its jobsite workers are covered
- Out-of-state subcontractors must have a Florida policy or endorsement utilizing Florida class codes, rates, rules and manuals in compliance with the Florida Insurance Code
- Statements summarizing Florida law which prohibits a licensed contractor from pulling permits for other contractors who are not licensed
These revisions primarily address premium disputes and collection issues that have surfaced within the last year.
The out-of-state contractor notice and statement regarding Florida law addresses a potential liability faced by the FWCJUA with insureds in licensed trades who appear to solely be in the business of pulling permits on behalf of unlicensed, uninsured employers.
The FWCJUA has recently uncovered a scheme in which a licensed insured, for a fee, pulled several building permits for an unlicensed and uninsured company, who then hired and paid subcontractors to complete the jobs. The scheme was discovered when a subcontractor was seriously injured, and the FWCJUAâ€™s policyholder was found to be the statutory employer for the injured worker.
The proposed statements would serve as a notice to employers that it is unlawful to pull permits for other, unlicensed contractors.
Proposed Employer Quarterly Self-Audit Program (â€œProgramâ€), associated Quarterly Payroll Reporting Form (â€œFormâ€) and Operations Manual revisions were approved by the Committee for submittal to the Board for adoption.
The Program would require the update of an employerâ€™s estimated payroll within 30 days of receipt of the Quarterly Self-Audit. Upon update, the employerâ€™s total estimated annual and deposit premiums would be reviewed. If the additional premium generated from the recalculation is greater than $100, an additional bill would be issued at that time.
Currently, the FWCJUAâ€™s policy administration service provider collects a copy of the employerâ€™s Quarterly Tax Report, which is filed with the Florida Department of Revenue. This allows the policy administration provider to identify significant payroll fluctuations only through the policyholder estimation, rather than actual payroll allocations by employee classification code. The latter method would give a more accurate representation of the policyholderâ€™s true exposure.
The Form would require each policyholder to provide a brief description of the work performed by each employee for accurate classification purposes, allowing for more accurate, quarterly-adjusted and yearly premiums. This would decrease the risk of uncollectible premium and would help identify any significant changes to the policyholderâ€™s business that may not otherwise be identified until the end of the policy term.
Operations Manual revisions would include addition of the Program and Form.
FWCJUA Payment Options
The FWCJUA currently has three payment options available to employers eligible for coverage:
- Payment in full of the total estimated premium
- A deposit and advance premium plan
- Use of a payroll service with a premium withholding program
In a previous meeting, it was suggested by the FWCJUA Producer Committee that FWCJUA staff provide the Board with an update on the premium withholding program to determine whether it should continue. Primary concern was that the only authorized payroll service partner at that time was PAYCHEX. Since the number of policies that use the payment method is low, few companies have pursued becoming an authorized payroll service partner. FWCJUA staff currently is investigating one potential partner.
FWCJUA staff recommended adding the Acknowledgement of FWCJUA Premium Payment Options Form, which all applicants would have to complete and sign to ensure they are aware of their premium payment options. It has been discovered that some agencies/designated producers have steered clients who do not have all of the required premium payments immediately available into financing agreements that would benefit the agency/producer, rather than suggesting the premium withholding program.
After discussion, the Committee approved continuation of the premium withholding program and the submittal of the Program and Form to the Board for final approval.
The Committee also approved a reformatting of the FWCJUA Operations Manual to include introduction of a proposed FWCJUA Policies and Procedures Guide. Pursuant to the July, 2007 passage of Senate Bill 1894 the FWCJUA Plan of Operation must now be approved by an Order of the OIR.
Concern has been expressed by the OIR that the current format of the FWCJUA Operations Manual would add additional time to its review. It has been determined that the reformatting would alleviate possible delays in the revision and implementation of necessary FWCJUA rules, rates and forms.
A possible return of premium dividend to policyholders was then reviewed by Ms. Torrence. The Board has considered declaring a return of premium dividends in the past, but has decided each time that the FWCJUA does not have sufficient surplus to do so.
In March 2007, the Committee suggested adopting a reasonable philosophy for declaring dividends, while retaining an appropriate surplus for future use. Thus, FWCJUA staff recommends that a minimum policy year maturation period be established; this maturation period would permit staff to systematically provide dividend analysis by year for approval. A five or 10 percent underwriting gain also is suggested to provide a safety net for claims paying abilities in the event of a major claim.
After discussion on the appropriate maturation time and percentage gain levels, the Committee approved development only of the dividend payment methodology with no limitations for Board approval.
The meeting was then adjourned.
Should you have any questions or comments, please do not hesitate to contact Colodny Fass.
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