Consent to Rate Filings by QBE Insurance

 We've just come across something I think worthy of comment, something that seems...unusual, at the least. We;ve discovered that QBE Insurance is using Consent to Rate filings on a large scale basis to get the Workers Comp manual rates for individual policyholders significantly increased. We've found numerous filings in Georgia and Illinois but my suspicion is that if we look, we'll find the same thing going on in a number of other states as well.

What's the significance? Well, for one thing, I think a lot of companies kind of operate on the assumption that the manual rate used for Workers Comp classifications are largely uniform. Now, in recent times, that isn't exactly so, as insurers in a great many states are free to file their own schedule of rates for Workers Comp insurance.

But Consent To File allows insurers to use higher rates that apply just to a single policyholder. But they're doing it for a lot of individual policyholders, it seems.

The potential problem, I think, is that some of these policyholders may not do much, if any, comparison shopping for their Workers Comp insurance. And so they may be unaware that they are being singled out, on a voluntary market policy, for the application of manual rates that are just about (or just slightly lower) than assigned risk rates.

This is all perfectly legal. But my advice, to anyone considering a Workers Comp proposal from QBE, would be to comparison shop the hell out of  your Workers Comp insurance. And don't rely on a single agent or broker, as they may have a financial incentive to sell policies with these higher rates.

What the Hell is Going On With the Georgia Assigned Risk Plan?

 Most of my readers already know what Assigned Risk Plans are, for Workers Compensation insurance, but for those who perhaps don't recall, Assigned Risk Plans, although they vary from one state to another in the details, are all state-created programs to make sure that Workers Compensation insurance coverage is always available to employers, even when insurance companies don't want to voluntarily underwrite WC coverage for a particular employer. Typically, the cost of the coverage is higher than it would be through the so-called "voluntary market" but employers can get the required coverage, even if an employer is too small, or too new, or too risky, in the eyes of insurance companies.

In recent years, I've been getting a lot of calls and emails from small-ish Georgia construction companies, though, about what I've come to call "Shock Audits" for Workers Comp. And over time, what I've been seeing is leading me to the conclusion that something is deeply wrong with the Georgia Assigned Risk Plan, particularly for small to medium-sized construction companies.

Consider just two recent Georgia employers that have reached out to me in the past week or so:

Case 1 is a small construction company that was sold an Assigned Risk policy for Workers Comp with an initial premium of $1,500.00. This small hispanic-owned business has now been sued by Liberty Mutual (the assigned risk servicing carrier that wrote coverage for this contractor) for just over $2,000,000.

Case 2 is another small Hispanic construction company that bought an Assigned Risk policy in Georgia for around $1,500. This one has a collection agency calling, because the Assigned Risk insurer says he owes around $500,000 for the insurance coverage.

Seeing a pattern here? Small, unsophisticated contractors are sold inexpensive Workers Comp policies, only to have this required insurance blow up on them after the policies end, with staggering bills for additional premiums.

These are far from the only such cases like this I've seen--these are just the two that have called in the past week or so. And the more I look into these cases, the more questions arise.

For one thing, as I've examined the Georgia Assigned Risk plan rates, I've learned that the rates are astonishingly higher than Assigned Risk rates in other states.

Consider the Georgia 2024 Assigned Risk manual rate for classification 5645, which is the class with the most payroll assigned to it. That manual rate is $103.17 per one hundred dollars of payroll. 5645 is the classification for carpentry work on construction of residential buildings.

And so, for every one hundred dollars paid to workers, the Georgia Assigned Risk Plan wants one hundred and three dollars.

For comparison, the Illinois Assigned Risk rate for Code 5645 is $31.14 in 2024.

Now, Illinois tends to be a state with relatively good benefits for injured workers. It's not like Indiana, with relatively crappy benefits. Yet the Assigned Risk rate for Code 5645 is a third of the Georgia rate.

And if you compare the reported cost of claims in Georgia and Illinois (which the National Council on Compensation Insurance does) the average cost of claims under Code 5645 in each state is much closer (although Georgia is higher than Illinois.)

In Georgia, NCCI has calculated that the average cost of claims under Code 5645, for 2024, is $12.88 per hundred dollars of payroll. In Illinois, the average cost of Code 5645 claims is $7.03 per hundred dollars of payroll.

To make matters worse, in most of these Georgia Shock audit cases I see, the insurance company has placed the payroll for these small construction contractors into Code 5645. I guess maybe that's why, according to NCCI, code 5645 is the Georgia classification with the most payroll assigned to it.

So what the hell is going on with the Georgia Assigned Risk Plan?

I don't know yet. But I'm gonna find out. Stay tuned.