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Commissioner’s Bulletin # B-0002-07

January 04, 2007

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 D-RATIOS UPDATING THE TEXAS BASIC MANUAL OF RULES, CLASSIFICATIONS, AND EXPERIENCE RATING PLAN FOR WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE.

By Commissioner's Order No. 06-1309, the Commissioner of Insurance has adopted revised Texas Workers' Compensation Classification Relativities and a revised table of expected loss rates and discount ratios amending the Texas Basic Manual of Rules, Classifications, and Experience Rating Plan for Workers' Compensation and Employers' Liability Insurance.

Summary Checklists of Required Submissions by Companies

Pursuant to the Insurance Code Article 5.55 §3(a), each insurer must file with the Texas Department of Insurance (Department), all rates, supplementary rating information, and reasonable and pertinent supporting information for risks written in this state. Accordingly, the following documents must be submitted to the Department:


For companies with no change in their filed deviation or a change to make the new relativities revenue neutral:

For companies with a change in their filed deviation:

Description of the Changes and Rate Level Impact

Classification Relativities

The change in the overall average level of the classification relativities is a revenue neutral change relative to the current classification relativities. That is, the new classification relativities, on an industry-wide basis, have been balanced back to the level of the January 1, 2006 classification relativities. However, the classification relativity change of any given classification is limited to +/- 25%.

Expected Loss Rates

The expected loss rates have decreased by an average of 14.1% overall from the January 1, 2006 level based on the latest statewide distribution of business by classification. Changes in individual expected loss rates were limited to +/- 25%. The maximum impact will be for larger risks in classes in which the expected loss rate decreased by 25%. In those cases, the experience modifier may increase by as much as 33%. In instances in which the expected loss rate increased by 25%, the experience modifier may decrease by as much as 20%.

Discount Ratios

The discount ratios were revised to reflect the change in the size of claims and benefit levels over time. Changes for an individual classification may affect the split between primary and excess losses.

Actions Required by Companies

Pursuant to the Insurance Code Article 5.55 §3, all insurance companies must either use the revised classification relativities adopted by Commissioner's Order No. 06-1309 or file their own company-specific classification relativities for all workers' compensation policies written with an effective date on or after March 1, 2007. For policies with an effective date on or after March 1, 2007, insurance companies may no longer use the January 1, 2006 classification relativities as the basis of their rates. All rates must be based either on the March 1, 2007 classification relativities or on company-specific classification relativities that have been filed with the Department. Insurance companies that currently have company-specific classification relativities on file with the Department must use the revised March 1, 2007 classification relativities or make a new filing of company-specific classification relativities. Insurance companies may use the new classification relativities prior to March 1, 2007, provided they notify the Department on or before the selected effective date for the new classification relativities.

Insurance companies currently writing workers' compensation insurance that plan to continue writing that coverage on or after March 1, 2007 , must send their submissions to the Department before March 1, 2007 . Insurance companies that are not currently writing workers' compensation insurance but plan to write their first policy with an effective date on or after March 1, 2007 , must send their submissions to the Department before the effective date of their first policy.

The revised expected loss rates must be used to calculate experience modifiers with an effective date on or after March 1, 2007. They may not be used to calculate an experience modifier with an effective date prior to March 1, 2007.

Copies of the tables of revised classification relativities and expected loss rates are available for download at the Department's website: www.tdi.state.tx.us. (Look for Commissioner's Bulletin No. B-0002-07 under Bulletins in the Lookup/Search section of the Department's home page.) The tables are available in Excel and PDF formats.

Required Submissions from Companies

If a company does not wish to change its deviations, it must complete the attached Notice of Carrier Intent and Certification, Schedule Rating Plan Information Sheet and Certification, and the Transmittal Form from the Filings Made Easy Guide, pursuant to 28 TAC §§5.9301-5.9357, to confirm the date that it will start using the new classification relativities (must be no later than March 1, 2007). The Notice of Carrier Intent and Certification for insurers currently writing workers' compensation coverage should be filled out completely even if the company has no change in its deviation or if no deviation exists. Such a submission will not be considered a rate filing under the Insurance Code Article 5.55 §3(a).

If a company wishes to achieve revenue neutrality, it may also adjust its existing deviation so that the introduction of the March 1, 2007 relativities is revenue neutral based on the company's own distribution of business by classification. Insurers adopting this approach should clearly indicate so in a cover letter and include as a separate exhibit a listing by classification of the January 1, 2006 and March 1, 2007 relativities and the most recently available payrolls by classification. An average of the sets of relativities weighted by the payrolls should also be included in the exhibit. Such a submission will not be considered a rate filing under the Insurance Code Article 5.55 §3(a).

If a company elects to change its deviations for reasons other than to achieve revenue neutrality (even if for only one class), the company must comply with the instructions for rate changes provided in the Filings Made Easy Guide. The company must also complete and include the attached Notice of Carrier Intent and Certification with the rate filing. Such a submission will be considered a rate filing under the Insurance Code Article 5.55 §3(a).

Companies that are not currently writing workers' compensation insurance but plan to write their first policy with an effective date on or after March 1, 2007, must comply with the instructions for rate changes provided in the Filings Made Easy Guide.

Additional Submissions Required from Companies - Schedule Rating Plans

Companies are also required to submit a copy of their current schedule rating plan, if applicable. This should include a list of the criteria used in assessing debits and credits, the maximum debit or credit for each criterion, and the maximum overall debit or credit allowed under the plan. Carriers must complete and submit the attached Schedule Rating Plan Information Sheet and Certification, regardless of whether or not they use schedule rating for workers' compensation insurance. Such a submission will not be considered to be a rate filing under the Insurance Code Article 5.55 §3(a).

Noncompliance

Failure of companies to comply with the required actions within the time limits specified 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.

Where to Send Submissions

All submissions should be sent to:

Texas Department of Insurance
Property and Casualty Intake Unit (MC 104-3B)
P. O. Box 149104
Austin, TX 78714-9104

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. Unless a company is changing its deviation, no other forms or other exhibits listed in the Filings Made Easy Guide, other than the Transmittal Form, need to be included in the filing.

The following documents may be downloaded from the Department's website:

If you are unable to download the exhibits, hard copies can be requested. Contact Dolores Thompson in the Property and Casualty Actuarial Division at 512-475-3017 or by e-mail at pcactuarial@tdi.state.tx.us .

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 Division

Attachments: Exhibit A and B

Schedule Rating Plan Information Sheet

Exhibit C

Notice of Carrier Intent

Notice of Carrier Intent and Certification

Schedule Rating Plan Information Sheet and Certification





For more information, contact:

Last updated: 01/06/2025


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