The commissioner of insurance has issued Commissioner's Order No. 2691, dated August 7, 2013, adopting amendments to Rule III E (Policy Preparation), Rule VII B (Premium Discount), and Appendix A (Procedures), and adding Rule VI M (Modeled Rating Factor) to the Texas Basic Manual of Rules, Classifications and Experience Rating Plan for Workers' Compensation and Employers' Liability Insurance. The amendments allow insurance carriers to file and use modeled rating factors to calculate their premiums.
The order amends Rule III E to add a Modeled Rating Factor (MRF) to the calculation of the total estimated policy cost of a workers' compensation policy. It amends Rule VII B to include modeled rating in the definition of standard premium. It amends Appendix A to include the MRF, if applicable, on the list of items on the information page of the policy. It adds Rule VI M to clarify the requirements for MRFs. The order also incorporates an editorial correction to the proposed text for Rule VI M.2.c.
The Manual changes are effective September 7, 2013, which is 15 days after the notice of adoption of the amended and additional rules are published in the Texas Register.
Under the amendments to Rule III E, an insurer will apply its MRF to the policy in a multiplicative manner, and must not apply or use the MRF in a way that duplicates other rating factors, such as schedule and experience rating factors. Once determined, the MRF will apply during the entire policy period. Insurance carriers will be required to evaluate each policy's characteristics and experience at each renewal to determine the MRF for the renewal policy.
The amendments require insurance carriers to make a filing with TDI under Title 28, Texas Administrative Code, Chapter 5, Subchapter M (Filing Requirements) before using an MRF. The filing must include the MRFs; the characteristics, variables, or criteria used to determine the MRFs; actuarial support for the MRFs; and other supporting documentation.
You can find the manual on the TDI website at www.tdi.texas.gov/wc/regulation/index.html. For further information concerning this bulletin, please contact the Workers' Compensation Classification and Premium Calculation Team by phone at 512-322-3495 or by email at PropertyCasualty@tdi.texas.gov.
Nancy Moore
WC Classification and Premium Calculation Team
Attachment: Commissioner's Order No. 2691