S.C. Actuary
Calls for 3.3% Drop in Loss Costs - Information released by SC Small
Business Chamber and WorkComp Central, February 19, 2008
The former chief casualty actuary for South Carolina stepped squarely into the
fight over skyrocketing loss costs in the voluntary workers' compensation
market Friday with a recommendation that pure premiums be cut by 3.3%.
The recommendation, included in testimony Martin M. Simons filed with the
state's administrative law court, starkly counters the call by the National
Council on Compensation Insurance (NCCI) to boost loss costs by 23.7%.
NCCI wanted the increase to take effect last Dec. 1.
But a denial by South Carolina Insurance Director Scott Richardson and court
challenges filed by state Consumer Advocate Elliott Elam Jr. and the South
Carolina Small Business Chamber of Commerce landed the premium change back in
the court of state Chief Administrative Law Judge Marvin Kittrell.
After Elam and the Small Business Chamber challenged NCCI's call for a 32.9%
increase in loss costs in 2005, Kittrell ended a protracted court fight by
cutting the last increase to 18.4%.
Simons said NCCI erred in the latest filing by using data drawn from the
residual market in its recommendations. Based on that, NCCI said loss costs
for new and renewal policies in the voluntary market should be boosted by
9.1%, and Simons said they should be cut by 3.3%.
"The voluntary loss costs must then be adjusted to offset the effects of the
assigned-risk differential so that the total loss costs are decreased by
3.3%," he said in the filing.
Further, he said, the court should rule out another 13.4% of the increase NCCI
wanted to cover reimbursements from the state Second Injury Fund.
Simons and the Small Business Chamber have argued that NCCI's recommendations
are based on claims data for the policy years 2003 and 2004, a two-year period
after lawmakers eliminated "unknown conditions" from the injuries and
illnesses covered by the Second Injury Fund.
South Carolina lawmakers came back last session and voted to phase-out the
fund altogether.
Simons served as chief casualty actuary for the South Carolina Insurance
Department for 12 years. He left in 1997 and founded a consulting firm with an
international client base in workers' compensation and hurricane insurance.
Simons is co-chair of the National Catastrophe Subcommittee of the American
Academy of Actuaries. He said he has worked as an actuarial consultant in
British Columbia and Manitoba and in the states of Arkansas, California,
Connecticut, Colorado, Delaware, Florida, Georgia, Hawaii, Illinois,
Louisiana, Massachusetts, Minnesota, New Mexico, North Dakota, Ohio, Oklahoma,
Rhode Island, South Carolina and Washington.
NCCI could not be reached for comment late Friday. Kittrell set Friday as the
deadline for testimony in the protracted case and is expected to convene a
trial in April or May.
Frank Knapp, president of the Small Business Chamber of Commerce, also
submitted testimony Friday and said Simons' challenges of estimates for the
Second Injury Fund and the assigned-risk data mirror those of Knapp's group.
"He's had all the data to look at," Knapp said. "When they first came out with
this, I said they couldn't justify more than a 6% increase just by eyeballing
what they gave us. Now we've actually seen the data and we can see what
they're doing."
Knapp said 2003 legislation eliminated most of the future claims to the Second
Injury Fund by excluding the unknown conditions.
"That was a big chunk of the cases. Our argument is that the costs from the
unknown conditions are already in the database. There is no need to prefund
them," Knapp said.
Simons highlighted his largest difference with NCCI over loss costs in the
categories for office-and-clerical jobs. NCCI recommended a 27.4% increase,
while Simons said loss costs should be cut by 0.4%.
NCCI recommended a 24.1% increase for manufacturing jobs, while Simons called
for cutting loss costs by 3%. And NCCI wants to boost loss costs for
construction-related workers by 24.6%, while Simons recommended reducing those
loss costs by 2.6%.
The debate over costs has indirectly landed in state and federal court, where
Gov. Mark Sanford is at odds with the South Carolina Workers' Compensation
Commission over Sanford's orders that the panel strictly apply American
Medical Association impairment guides or other objective criteria when making
disability awards.
The commission argues the executive orders violate state law and the South
Carolina Code of Judicial Conduct.
A
copy of Simons' testimony is available at http://www.workcompcentral.com/pdf/2008/misc/SimonsFiling.pdf.
A
copy of Knapp's testimony is available at
http://www.scsbc.org/view_issue.asp?id=46
--By Michael Whiteley, WorkCompCentral Eastern Bureau Chief
mike@workcompcentral.com
