Tightening up regulations over commercial vehicle insurance

On March 1, 2016, WRAL Investigates reported that North Carolina Insurance Commissioner Wayne Goodwin wants state lawmakers to tighten up regulations over commercial vehicle insurance, stating that some out-of-state trucking companies are claiming in-state residency to obtain lower insurance rates.

It is no secret that North Carolina has some of the lowest vehicle insurance rates in the country. These insurance policies, however, are available only to residents and businesses that reside in the state. According to WRAL, ten years ago, drivers from New York and New Jersey were registering their cars in North Carolina in order to get cheaper car insurance. But, the General Assembly changed the law to stop this from happening.

Today, the same issue is occurring in the $670 million-a-year commercial vehicle insurance market. Reportedly, North Carolina Insurance Commissioner Wayne Goodwin is seeking to have a similar statutory enactment passed. In recent years, the North Carolina Reinsurance Facility raised its commercial rates because of significant claim losses. Goodwin attributes this increase in commercial rates to out-of-state trucking companies claiming in-state residency to obtain lower insurance rates. Goodwin has been quoted as saying: "They have accidents in other states and the like. It impacts insurance rates for the legitimate businesses that are here, and it's becoming a growing problem."

WRAL Investigates confirmed North Carolina freight insurance coverage for Senn Freight Lines in Newberry, S.C. A spokesman for Senn stated that the company has no North Carolina operations, although an internal insurance memo indicated that Senn claims one truck registered and one driver licensed in the state. According to the Secretary of State's Office, another trucking company, Fast Transport, Inc., is listed as a North Carolina registered corporation. However, the address listed for Fast Transport is in a remote residential neighborhood in Wake Forest, and a spokesman for Fast Transport stated that the Wake Forest house is the trucker's accounting headquarters. According to WRAL's investigation, Fast Transport claims dozens of trucks in Florida, Georgia, and Texas but only one truck in North Carolina.

The Insurance Commissioner's position seems to be that only North Carolina companies should be able to take advantage of the state's lower insurance rates. He wants "to protect and help the legitimate companies that are doing business in North Carolina from being taken advantage of by businesses...that are misleading the state and misleading insurance companies as to their presence in the state.

As a result, Goodwin's office is drafting legislation to present to the General Assembly when lawmakers reconvene in April that would better differentiate between North Carolina companies and posers exploiting the law to get cheaper rates.

NC Insurance Commissioner Expresses Frustration about Medical Insurance Rate Increases

The Raleigh News and Observer ran an interesting piece regarding the Medical Insurance options in North Carolina. In particular, it comments that the Legislature's decision not to expand Medicaid, set up its own ACA exchange, or partner with the federal government in running an exchange has made premiums higher.  

The Commissioner's reported comments are strong, and not what we typically see from an elected official. It is worth a read, and is located here. 

If you are unfamiliar with the expansion of Medicaid topic, a primer on the subject (albeit comedic) can be located here.

Read more here: http://www.newsobserver.com/opinion/opn-columns-blogs/ned-barnett/article43619169.html#storylink=cpy

NC Workers’ Compensation Loss Costs Reduction for the Voluntary Market

Since 2011, there has been a large shift in North Carolina workers’ compensation law. These changes include statute changes, rules changes, personnel changes at the Industrial Commission, and new focuses for the Commission such as faster decisions and finding uninsured employers.

Recently, the North Carolina Rate Bureau has released new numbers advising for a reduction in loss costs for the voluntary market. In particular, the NCRB has suggested that the loss costs for the voluntary market for workers’ compensation insurance be reduced on average by 10.2%. 

Loss costs, sometimes called pure premium, is a number that represents the expected costs to an insurer of loss (such as indemnity payments) and the adjustment expenses for those payments. The loss costs are specifically tailored to job codes, but represent the overall market. The recommended reduction in rates would become effective in April 2016.

This is a significant reduction.  In 2014, NCRB only recommended a reduction of the loss costs numbers of 3.4%.  In 2013, the loss costs recommendation was an increase in 0.3%.    In 2012, the loss costs recommendation was a 0.5% decrease. 

The natural next question among employers is whether they will see a reduction in workers’ compensation premiums based on the loss costs reduction.

The ultimate answer is: it depends on your insurance carrier. First, your insurance carrier would have to adopt the recommended loss costs. Even if your insurance carrier does, the loss costs number is one factor in determining rates. The other major factor is the insurance company’s Loss Costs Multiplier (“LCM”). This LCM factors the individual insurance company’s expenses such as commission and brokerage, general expenses (overhead), taxes, licenses, profit, contingencies and investments. You insurance premium will be derived from the types of jobs your employees do, the amount of payroll you have, the loss costs, and the LCM.  

While the reduction in loss costs is not a guarantee of premium reduction, it is a predictive number that estimates that workers’ compensation costs are on a downward trend.