Would cover future pandemics & catastrophes
The possibility that the current pandemic may not be an infrequent event has the workers’ compensation insurance industry proposing a new multi-million dollar catastrophe fund that businesses would pay into through a special annual premium to cover future pandemics.
The National Council on Compensation Insurance (NCCI) has filed a request with the Florida Office of Insurance Regulation (OIR) to charge a special premium of $20 million annually on Florida businesses to go into a Cat Fund “for any single event or peril resulting in workers compensation losses in excess of $50 million nationwide,” according to its 2022 Filing Summary. It may include pandemics but would exclude Certified Acts of Terrorism. NCCI provides ratemaking services for 37 states and the District of Columbia and submits rate filings on behalf of Florida’s workers’ comp carriers.
NCCI began to make the case for a special Cat Fund in this June paper that incorporated modeling by AIR Worldwide on the impact the coronavirus pandemic could have on workers’ comp insurance nationwide. NCCI estimates that claims will exceed $500 million in its 37 states and D.C. Florida’s COVID-19 claims are $34.1 million for 2020, excluding self-insured claims. The industry is also facing increased expense of “long haul COVID” cases (patients dealing with long-term health issues following initial treatment), as we reported in the last newsletter, given the federal government now considers it a disability.
NCCI has also filed its annual rate request with OIR, which excludes adjustments for the potential impact of a pandemic. It is asking for a statewide average premium decrease of 4.9%, effective January 1, 2022. If approved, this would be the sixth consecutive rate decrease in Florida since 2016. NCCI cites underwriting discipline, declining frequency, moderating severity, and adequate reserves for the declining rates.
“Florida’s lost-time claim frequency continues its decline while the state’s average indemnity and medical costs per lost- time claim have exhibited relatively more year-to-year volatility,” according to its filing, which is based on experience in 2018 and 2019. “NCCI has no expectation that the long-term downward trend in frequency will change. For the last several years, severity trends have remained fairly moderate, tracking very closely with wage inflation,” NCCI said.
LMA Newsletter of 9-7-21
