Great news for businesses in Florida! The Florida Insuranece Commissioner approved an overall rate decrease of 15.1% starting on January 1st 2024.[1]
Over the past 20 years, Florida has seen an over 50% reduction rate in workers compensation. This decline has been influenced by a multitude of factors, reflecting both economic shifts, medical innovation, and legislative changes impacting the compensation landscape for businesses and employees.
Historic Trends in Workers Compensation
In the early 2000s, Florida experienced a surge in workers' compensation rates due to increased claims, rising medical costs, and legal complexities. This led to a heightened financial burden on businesses, prompting policymakers to take action.
Legislative reforms were introduced in Florida to address the escalating costs. These change focused on reducing fraudulent claims, tightening eligibility criteria, and implementing cost-containment measures within the system. This period witnessed a gradual decline in rates as these reforms took effect. “In late 2003 and again in 2006, employers saw average annual rate drops of almost 14%. Since then, rates in Florida have dropped 17 times – a 74% cumulative decline since 2003, NCCI said. That mirrors comp rate decreases seen across the country due in part to impmorved saftey and fewer workplace injuries experts have said."[2] Recent years have this this continued downward trajectory in rates, with ongoing efforts to streamline the workers' compensation system.
Factors Driving Rate Reduction
Three categories have contributed significantly to the substantial rate decreases of the past two decades.
Legislative Reforms
Florida's policymakers have enacted several legislative changes aimed at curbing costs associated with workers' compensation claims. Reforms included stricter eligibility criteria, limitations on attorney fees, and measures to combat fraudulent claims.
Improved Workplace Safety
Businesses across various industries have increasingly emphasized workplace safety measures. This proactive approach has resulted in fewer workplace accidents and subsequently reduced claims, positively impacting insurance rates.
Medical Advancements and Cost Controls
Advancements in medical treatments and therapies have optimized the recovery process for injured workers. Additionally, cost controls within the medical sector have helped contain expenses related to treatments and rehabilitation.
Implications for Businesses
“I’m always working to support Florida’s small businesses and entrepreneurs. A decrease in workers’ compensation rates means lower insurance costs for employers, allowing them to put more money back into their business, where it belongs,” said Chief Financial Officer Jimmy Patronis. “I’m pleased that Florida’s business owners will benefit from another year of rate relief and look forward to keeping Florida the best place to live, work, and run a business.”[3] A continuation of declining rates could potentially benefit businesses by lowering insurance expenses, improving profitability, and enabling more resources to be allocated to other areas of operation. However, businesses must remain vigilant and adaptable, as unforeseen shifts in the economic or regulatory landscape could impact these trends.
Some business owners aren’t as excited about this rate decrease. Roofers are urging legislators to freeze the decrease in rates[4] expecting future claims rates to increase substantially due to the recent legislation on illegal immigration. Since many of these skilled laborers have left the state, the remaining workers are less skilled and have an increased risk for accidents on the job-site.
Some also fear that such substantial decrease in rates could encourage insurance companies to leave the state, leaving less competition for coverage. And others believe that the rate decreases are too hasty, being an abnormal outcome of a slowed economy during COVID.
Future Rates
Forecasting future rates in workers' compensation involves a complex interplay of economic, legislative, and societal factors. While past trends indicate a decline, future rates could stabilize or experience slight fluctuations due to various unforeseen circumstances.
While no one wants to see a pendulum swing of workers comp rates, we can appreciate the current financial relief small businesses have been granted. In the next few years, we’ll see if it really was a fluke or really a product of innovation, safety, and legislation.