COMMISSIONER'S BULLETIN #B-0004-13
February 27, 2013
TO: All insurance companies, corporations, exchanges, mutuals, reciprocals, associations, Lloyds, or other insurers writing workers’ compensation and employers’ liability insurance 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 AND EMPLOYERS’ LIABILITY INSURANCE. INSTRUCTIONS ON MAKING RATE FILINGS.
By Commissioner’s Order No. 2312, the commissioner adopted revised Texas workers’ compensation classification relativities and a revised table concerning the expected loss rates and discount ratios by classification used in experience rating.
The order requires each workers’ compensation insurer, for all workers’ compensation policies written with an effective date on or after June 1, 2013, to adopt the revised classification relativities unless the insurer files to use its own independent insurer-specific classification relativities or the National Council on Compensation Insurance (NCCI) loss costs effective on June 1, 2013. Insurers may no longer use the June 1, 2011, classification relativities, or the June 1, 2012, NCCI loss costs as the basis of their rates for policies with an effective date after June 1, 2013. Insurers may use the new classification relativities before June 1, 2013, if they submit a filing to the Texas Department of Insurance before the selected effective date.
Under Insurance Code Chapter 2053, insurers must use the revised expected loss rates and discount ratios to calculate experience modifiers with an effective date on or after June 1, 2013. Insurers may not use them to calculate an experience modifier with an effective date prior to June 1, 2013.
Effect of the Changes Adopted in the Order
- Classification RelativitiesThe change in the overall average level of the classification relativities is revenue neutral relative to the current classification relativities. However, the change for any given classification’s relativity is limited to +/- 25 percent.
- Expected Loss RatesThe expected loss rates decreased by an average of 13.9 percent overall from the June 1, 2011, level based on the latest statewide distribution of business by classification. The change for any given classification is limited to +/- 25 percent.
- Discount RatiosThe overall level of the discount ratios remained the same. However, the change for any given classification’s discount ratio is not subject to capping. The change for any given classification’s discount ratio may affect the split between primary expected losses and excess expected losses.
NCCI Loss Costs
NCCI made an advisory loss cost filing in September 2012. Insurers planning to adopt the loss costs should follow the filing instructions below. NCCI’s loss costs are available for insurers to use as an alternative rate basis to the classification relativities.
Actions Required of Insurers
Texas Insurance Code, Section 2053.003 requires each insurer to file with TDI all rates, supplementary rating information, and reasonable and pertinent supporting information for risks written in this state. Insurers currently writing workers' compensation insurance that plan to continue writing that coverage on or after June 1, 2013, must complete and submit the Notice of Carrier Intent and Certification no later than May 1, 2013. The insurer MUST also submit, no later than May 1, 2013, 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 advisory loss costs. See the “Summary of Actions Required by Insurers” exhibit for more details.
Insurers’ rate filings should use the most recently available data and information. It is not generally sufficient to reference the filing the insurer made in response to the call for rate filings for the 2012 public rate hearing, per Commissioner’s Bulletin B-0015-12.
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, 2013, must send its Notice of Carrier Intent and Certification and rate filing to TDI before the effective date of its first policy.
Filing Forms and Exhibits
The Property and Casualty Filings Made Easy Guide specifies rate-filing requirements and is located on TDI’s website at www.tdi.texas.gov/pubs/pc/rspceasy.html.
This commissioner’s bulletin and the documents listed below are located on TDI’s website at www.tdi.texas.gov/bulletins/index.html. The tables are available in Excel and PDF formats. You may request hard copies by contacting Dolores Thompson in the Property and Casualty Actuarial Office by phone at 512-475-3017 or by email at email@example.com.
Summary of Actions Required by Insurers
Notice of Carrier Intent and Certification
Exhibit A: Revised Classification Relativities
Exhibit B: Revised Expected Loss Rates and Discount Ratios
Exhibit C: Determination of 06/01/2013 Expected Loss Rates and Discount Ratios for Certain Selected ‘a’ Rated Classes
Where to Send Filings
Insurers may submit rate filings via SERFF, or send them to the following address:
Texas Department of Insurance
Property and Casualty Intake Unit (MC 104-3B)
P. O. Box 149104
Austin, TX 78714-9104
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 loss costs for all workers’ compensation policies written with an effective date on or after June 1, 2013, may constitute a violation of the Insurance Code and Title 28 of the Administrative Code and may subject the insurer to penalties provided by law.
For further information, or if you have questions concerning this bulletin, please contact Elizabeth Buhro in the Property and Casualty Actuarial Office by phone at 512-305-6747 or by email at: firstname.lastname@example.org.
Property and Casualty Actuarial Office
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