The OIR's order is requesting that NCCI amend its filing by November 1, 2007.  NCCI also has the option to appeal and is in the process of reviewing the order and making a decision on how to respond.

Posted below are the news release from the Office of Insurance Regulation announcing the decision, and a response from NCCI

FLORIDA INSURANCE COMMISSIONER MCCARTY ORDERS FURTHER DECREASE IN
WORKERS' COMPENSATION INSURANCE RATES
 
TALLAHASSEE, Fla. (10/23/2007) - Florida Insurance Commissioner Kevin
McCarty announced today that he has disapproved the National Council on
Compensation Insurance's (NCCI) latest rate filing for workers'
compensation insurance rates, due to become effective next year.
Commissioner McCarty ordered NCCI to make an amended filing to reduce
the rates of workers' compensation insurance in Florida by 18.4 percent.

The order to amend the filing means a further rate reduction from the
NCCI's originally requested 16.5 percent decrease and would produce a
savings of over $700 million for Florida employers. McCarty has asked
the NCCI to amend the filing citing disagreements with the methodology
NCCI used to calculate the profit factors and trend factors. Trend
factors incorporate changes in wages, paid losses and claim frequency.
 
"Much of the thanks for positive changes such as these goes to the
Legislature for passing the 2003 law that reformed the workers'
compensation system," said McCarty. "It was both courageous and
necessary, because for years workers' compensation was a troublesome
issue for the state."

Prior to the legislative reforms, Florida consistently ranked No. 1 or
No. 2 in the country for the highest workers' compensation rates;
however, post-reform, Florida has dropped out of the top 10 rankings.
This 2008 change could drop Florida as far as the mid-twenties depending
on the rate changes in the other states.

The amended rate decrease will denote the fifth consecutive drop since
the Legislature passed the reforms; and with this change, the cumulative
overall statewide average rate decrease since 2003 will be over 50
percent. The 18.4 percent decrease will be the largest one-year decrease
in workers' compensation rates on record for Florida. The five filings
since reform represent the largest consecutive cumulative decrease in
Florida rates.

The NCCI, which produces and files rates for insurers in many states,
said the rate decline was primarily due to a significant drop in claims
frequency and a reduction in the costs of claims.

"The rate for roofers is especially noteworthy," said McCarty. "It would
be the lowest the rate has been since 1984 and would represent a 58
percent decrease overall since the new law took effect. We're aware that
the new building codes have increased costs for new roofs; but the good
news is that with the decrease, the labor portion would see a favorable
effect."

The 2003 law instituted provisions for enhanced fraud compliance and
revised permanent and temporary disability definitions. It also set new
parameters for attorney and physician compensation and improved dispute
resolution procedures, in addition to making many other changes to the
system. Further, the Department of Financial Services Division of
Workers' Compensation has significantly stepped up its compliance
efforts to ensure that more employers are buying workers' compensation
insurance to protect their employees, which has added premium to the
system.
 

Based upon its annual review of the most recent data available, the National Council on Compensation Insurance (NCCI) proposed an overall workers compensation rate level decrease of 16.5% for the voluntary market industrial classes effective January 1, 2008. On October 22, 2007, the Office of Insurance Regulation (OIR) issued an order requesting that NCCI make an amended filing for an overall workers compensation rate level decrease of 18.4%.

There are three areas which account for the difference of 1.9%:

1. Trend*
The OIR states that a -1.5% medical trend and a -6.5% indemnity trend should be included instead of NCCI’s proposed -1% medical trend and -6% indemnity trend. The rate impact of the difference is -1.3%.

2. Profit and Contingency Provision**
The OIR states that the profit and contingency provision should be reduced to
-0.8%. NCCI had proposed maintaining the profit and contingency provision at 0%. The rate impact of the difference is -0.9%.

3. Expense Constant***
The OIR disapproved the proposed increase in the expense constant from $200 to $240. Prior to applying the proposed change in the expense constant, NCCI’s proposed decrease was 16.2%. To offset the proposed increase in the expense constant in a revenue neutral fashion, -16.2% was adjusted downwards by 0.3% to -16.5%. The rate impact of removing the adjustment is +0.3%.

The OIR’s order requested that NCCI amend its filing by November 1, 2007. NCCI also has the option to appeal. NCCI is currently in the process of reviewing the order and making a decision on how to respond.

*When past data is to be used as a predictor of future losses (in the case of this rate filing, accident years 05 and 06 are used to project losses for 08), loss data must be adjusted or “trended” to account for changes in costs (such as inflationary pressures) between the time period of the historical data (05 and 06) and the period when the rates will be in effect (08). In addition to reflecting inflationary pressures, it would encompass expected changes in: the frequency of claims, the types of claims that are occurring, indemnity awards, and in the types of medical services being provided.

**A profit and contingency provision of 0% means that nothing is included in the rate in order for carriers to achieve a fair rate of return. Carriers must rely on investment income or better than expected results in order to generate earnings.

***The expense constant is a per policy charge to cover fixed expenses related to policy underwriting and issuance.