By Commissioner's Order No. 11-0125 (Order), 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.
The Order requires that each workers' compensation insurer, for all workers' compensation policies written with an effective date on or after June 1, 2011, adopt the revised classification relativities unless the insurer files to use its own independent insurer-specific classification relativities or to use the National Council on Compensation Insurance (NCCI) amended loss costs filing (see below). Insurers may no longer use the May 1, 2009 classification relativities as the basis of their rates after June 1, 2011. Insurers may use the new classification relativities prior to June 1, 2011, provided they submit a filing with the Texas Department of Insurance (Department) before the selected effective date.
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 June 1, 2011. They may not be used to calculate an experience modifier with an effective date prior to June 1, 2011.
Effect of the Changes Adopted in the Order
- Classification Relativities
The classification relativities have been decreased by an average of 7.4% overall from the May 1, 2009 level. The change for any given classification is limited to +16% and -31%.
- Expected Loss Rates
The expected loss rates have decreased by an average of 16.7% overall from the May 1, 2009 level based on the latest statewide distribution of business by classification. The change for any given classification is limited to +/- 25%.
- Discount Ratios
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. The change for any given classification may affect the split between primary expected losses and excess expected losses.
NCCI Advisory Loss Costs
The NCCI made its initial advisory loss cost filing in August 2010 and amended that filing in February 2011. Insurers planning on adopting the advisory loss costs as amended should follow the filing instructions below. The NCCI's advisory loss costs are available for insurer use as an alternative to the classification relativities.
Actions Required of Insurers
Texas Insurance Code, Section 2053.003 requires each insurer to file with the Department all rates, supplementary rating information, and reasonable and pertinent supporting information for risks written in this state. Accordingly, insurers currently writing workers' compensation insurance that plan to continue writing that coverage on or after June 1, 2011, must submit the completed attached Notice of Carrier Intent and Certification no later than May 2, 2011. The insurer MUST also submit, no later than May 2, 2011, a rate filing supporting its proposed deviation if it intends to base its rates on the new classification relativities or its own independent insurer-specific classification relativities, or its proposed loss cost multiplier if it intends to base its rates on the NCCI amended loss costs. Such filing must include a transmittal form, supplementary rating information, and pertinent supporting information. See the requirements in the Filings Made Easy Guide, which provides the necessary instructions and filing forms. The information may also be provided in insurer forms and formats.
It is not generally sufficient to reference the filing the insurer made in response to Commissioner's Bulletin B-0021-10 (Call for rate filings for the 2010 public rate hearing.) The filing should be based on the most recently available data and information.
An insurer that is not currently writing workers' compensation insurance but plans to write its first policy with an effective date on or after June 1, 2011, must send its Notice of Carrier Intent and Certification and filing to the Department before the effective date of its first policy.
Filing Forms and Exhibits
Filing requirements are specified in the Property and Casualty Filings Made Easy Guide at: http://www.tdi.state.tx.us/company/rspceasy.html. The transmittal form and filing exhibits are also available in the Filings Made Easy Guide.
The following documents may be downloaded from the Department's website at www.tdi.state.tx.us. (Look for Commissioner's Bulletin No. B-0011-11 under Bulletins in the Resources section of the Department's home page.) The tables are available in Excel and PDF formats.
- Notice of Carrier Intent and Certification
- Exhibit A: Revised Classification Relativities
- Exhibit B: Revised Expected Loss Rates and Discount Ratios
- Exhibit C: Determination of 06/01/2011 Expected Loss Rates and Discount Ratios for Certain Selected 'a' Rated Classes
If you are unable to download the exhibits, hard copies can be requested by contacting Dolores Thompson in the Property and Casualty Actuarial Division at 512-475-3017 or by e-mail at pcactuarial@tdi.state.tx.us.
Where to Send Filings
Filings may be submitted via SERFF or sent to the following address:
Texas Department of Insurance
Property and Casualty Intake Unit (MC 104-3B)
P. O. Box 149104
Austin, TX 78714-9104
Noncompliance
Failure of an insurer to adopt the revised classification relativities or to file to use its own independent insurer-specific classification relativities, or to file to use the NCCI amended loss costs for all workers' compensation policies written with an effective date on or after June 1, 2011, 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.
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.
J'ne Byckovski
Chief Actuary
Property and Casualty Actuarial Division
Notice of Carrier Intent
Certification Exhibits A,B
Exhibit C