Website SurveyCOMMISSIONER'S BULLETIN #B-0009-09March 3, 2009
TO: ALL INSURANCE COMPANIES, CORPORATIONS, EXCHANGES, MUTUALS, RECIPROCALS, ASSOCIATIONS, LLOYDS, OR OTHER INSURERS WRITING WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURFANCE IN THE STATE OF TEXAS, THEIR AGENTS AND REPRESENTATIVES, AND TO THE PUBLIC GENERALLY. RE: REVISED WORKERS’ COMPENSATION CLASSIFICATION RELATIVITIES AND A REVISED TABLE OF EXPECTED LOSS RATES AND DISCOUNT RATIOS UPDATING THE TEXAS BASIC MANUAL OF RULES, CLASSIFICATIONS, AND EXPERIENCE RATING PLAN FOR WORKERS’ COMPENSATION ANDEMPLOYERS’ LIABILITY INSURANCE.
By Commissioner’s Order No. 09-0104, the Commissioner of Insurance has adopted revised Texas Workers’ Compensation Classification Relativities (classification relativities) and a revised table concerning the Expected Loss Rates and Discount Ratios by classification used in experience rating, which is contained in the Texas Basic Manual of Rules, Classifications, and Experience Rating Plan for Workers’ Compensation and Employers’ Liability Insurance. The Commissioner’s Order can be viewed at http://www.tdi.state.tx.us/orders/index.html by clicking on Order No. 09-0104. Summary Checklists of Required Submissions from Insurers For insurers with no change in their filed deviation:
For insurers with a change in their filed deviation to make the adopted revised relativities revenue neutral:
For insurers with other changes in their filed deviation:
Pursuant to Insurance Code Article 5.96 and Chapter 2053, each workers’ compensation insurer must either adopt the revised classification relativities or file its own insurer-specific classification relativities. Section 2053.003 requires each insurer to file with the Texas Department of Insurance (Department) all rates, supplementary rating information, and reasonable and pertinent supporting information for risks written in this state. Accordingly, each workers’ compensation insurer changing its filed deviation following the adoption of the revised classification relativities and expected loss rates must make a submission to the Department. Workers’ compensation insurers with no changes in their filed deviations must submit information indicating this. The attached Notice of Carrier Intent and Certification, as well as the Transmittal Form and filing forms and materials in the Filings Made Easy Guide, available at 28 TAC §§5.9310, 5.9340–5.9342, are provided to assist insurers in submitting information and filings. The information may also be provided in insurer forms and formats. Description of the Changes and Rate Level Impact
The classification relativities have been decreased by an average of 10% overall from the January 1, 2008 level. The classification relativities were reduced from 60% of the overall average level of the 1994 classification relativities to 54% of the 1994 classification relativities. The classification relativity change of any given classification is limited to +/- 25% prior to the adjustment to reduce the classification relativities to 54% of the 1994 classification relativities. After adjustment, the classification relativity change of any given classification is limited to +12.5% and -32.5% of the January 1, 2008 level.
The expected loss rates have decreased by an average of 15.9% overall from the January 1, 2008 level based on the latest statewide distribution of business by classification. Changes in individual expected loss rates were limited to +/- 25%. The maximum impact will be for larger risks in classes in which the expected loss rate decreased by 25%. In those cases, the experience modifier may increase by as much as 33% due solely to the change in the expected loss rates. In instances in which the expected loss rate increased by 25%, the experience modifier may decrease by as much as 20% due solely to the change in the expected loss rates.
The discount ratios were revised to reflect the change in the size of claims and benefit levels over time. The overall level of the discount ratios did not change. Changes for an individual classification may affect the split between primary and excess losses. Actions by InsurersPursuant to Insurance Code Chapter 2053, insurers must either adopt the revised classification relativities adopted by Commissioner’s Order No. 09-0104 or file their own insurer-specific classification relativities for all workers’ compensation policies written with an effective date on or after May 1, 2009. Pursuant to Commissioner’s Order No. 09-0104, for policies with an effective date on or after May 1, 2009, insurers may no longer use the January 1, 2008 classification relativities as the basis of their rates. All rates must be based either on the May 1, 2009 classification relativities or on insurer-specific classification relativities that have been filed with the Department. Insurers that currently have insurer-specific classification relativities on file with the Department must also use the revised May 1, 2009 classification relativities or make a new filing of insurer-specific classification relativities. Insurers may use the new classification relativities prior to May 1, 2009, provided they notify the Department before the selected effective date for the new classification relativities. Insurers should take into account their rate indication filed with the Department in response to Commissioner’s Bulletin No. B-0036-08 when determining the deviation to use in conjunction with the May 1, 2009 relativities. Pursuant to Insurance Code Chapter 2053, the revised expected loss rates and discount ratios must be used to calculate experience modifiers with an effective date on or after May 1, 2009. They may not be used to calculate an experience modifier with an effective date prior to May 1, 2009. Insurers currently writing workers' compensation insurance that plan to continue writing that coverage on or after May 1, 2009, must send their submissions to the Department before April 1, 2009. Insurers that are not currently writing workers' compensation insurance but plan to write their first policy with an effective date on or after May 1, 2009, must send their submissions to the Department before the effective date of their first policy. Copies of the tables of revised classification relativities, expected loss rates, and discount ratios are available for download at the Department’s website: www.tdi.state.tx.us. (Look for Commissioner’s Bulletin No. B-0009-09 under Bulletins in the Lookup/Search section of the Department’s home page.) The tables are available in Excel and PDF formats. Required Submissions from InsurersIf an insurer does not wish to change its deviations, it must complete the attached Notice of Carrier Intent and Certification and the Transmittal Form from the Filings Made Easy Guide to confirm the date that it will start using the new classification relativities (must be no later than May 1, 2009). The Notice of Carrier Intent and Certification for insurers currently writing workers’ compensation coverage should be filled out completely even if the insurer has no change in its deviation or if no deviation exists. Such a submission will not be considered a rate filing under Insurance Code §2053.003. If an insurer wishes to achieve revenue neutrality, it may adjust its existing deviation so that the introduction of the May 1, 2009 relativities is revenue neutral based on the insurer’s own distribution of business by classification. Insurers adopting this approach should clearly indicate so in a cover letter and include as a separate exhibit a listing by classification of the January 1, 2008 and May 1, 2009 relativities and the insurer’s most recently available payrolls by classification. Averages for each of the two sets of relativities weighted by the payrolls should also be included in this exhibit. Additionally insurers should include actuarial support showing they do not have an indicated decrease in their needed rate level. The insurer must comply with the instructions for rate changes provided in the Filings Made Easy Guide. The insurer should also complete and include the attached Notice of Carrier Intent and Certification with the rate filing. Such a submission will be considered a rate filing under Insurance Code §2053.003. If an insurer elects to change its deviations for reasons other than to achieve revenue neutrality (even if for only one class), the insurer must comply with the instructions for rate changes provided in the Filings Made Easy Guide. The insurer should also include actuarial support and complete and include the attached Notice of Carrier Intent and Certification with the rate filing. Such a submission will be considered a rate filing under Insurance Code §2053.003. Insurers that are not currently writing workers' compensation insurance but plan to write their first policy with an effective date on or after May 1, 2009, must comply with the instructions for rate changes provided in the Filings Made Easy Guide. Noncompliance Failure of insurers to adopt the revised classification relativities and the changes to the uniform experience rating plan or, where applicable, to file their own insurer-specific classification relativities for all workers’ compensation policies written with an effective date on or after May 1, 2009, may constitute a violation of the Insurance Code and/or Title 28 of the Administrative Code and may subject the insurer to penalties provided by law. When and Where to Send Submissions All submissions should be received by the Department by April 1, 2009. All submissions should be sent to: Texas Department of Insurance Forms and Exhibits Filing requirements are specified in the Property and Casualty Filings Made Easy Guide at:http://www.tdi.state.tx.us/pubs/pc/rspceasy.html. Unless an insurer is changing its deviation, no other forms or other exhibits listed in the Filings Made Easy Guide, other than the Transmittal Form, need to be included in the filing. The following documents may be downloaded from the Department’s website:
If you are unable to download the exhibits, hard copies can be requested. Contact Dolores Thompson in the Property and Casualty Actuarial Division at (512) 475-3017 or by e-mail at pcactuarial@tdi.state.tx.us. Department Contact For further information or questions concerning this bulletin, please contact Elizabeth Buhro in the Property and Casualty Actuarial Division at (512) 305-6747 or by e-mail at elizabeth.buhro@tdi.state.tx.us. Attachment: Notice of Carrier Intent and Certification For more information contact: PCActuarial@tdi.state.tx.us |
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