Florida Workers Compensation Rate Filing Overview August 29

Florida Workers Compensation Rates 1/1/07 10/1/03 to 1/1/07* Manufacturing Contracting Office & Clerical Goods

Declines in Claim Frequency Have Contributed to Florida’s Improving Results SB 50 A Effective

Rolling 12 Mos Avg Lost-Time Claims Per 1, 000 Employees SB 50 A Effective

Florida’s Average Indemnity Severity in Excess of Wage Growth Excluding On-Levels SB 50 A

Florida’s Average Medical Severity in Excess of Wage Growth Excluding On-Levels SB 50 A

State Voluntary Market Filings Southeastern NAIC Zone South Carolina* 11/1/05 +32. 9% North Carolina

Current Average Voluntary Pure Loss Costs Using Florida’s Payroll Distribution 8 © Copyright 2006

SB 50 A Impact 9 © Copyright 2006 National Council on Compensation Insurance, Inc.

NCCI Survey Findings (June 2006) • NCCI interviewed 11 of the top Florida writers

NCCI Survey Findings (June 2006) • Attorney Fees – 4 of 11 see number

NCCI Survey Findings (June 2006) • Psychiatric Impairment – 9 of 11 seeing less

NCCI Survey Findings (June 2006) • Dispute Resolution – Some see more efficient resolution

NCCI Survey Findings (June 2006) • Hospital, Physician and Drug Costs – Hospital: 5

Recent DOAH WC Activity in Florida SB 50 A Effective 10/1/03 Data from FL

Number of Petitions Filed/New Cases FY 2003 FY 2004 FY 2005 FY 2006 Petitions

State of Florida WC Market 17 © Copyright 2006 National Council on Compensation Insurance,

Florida Written Premium 2005 p: Preliminary based on NAIC Annual Statement data. 18

Largest Writers in Florida Labels Reflect Market Share Based on NAIC Annual Statement data.

Residual Market Percentage Calendar Year 2005 Percent Data is evaluated as of 12/31/2005. 20

Residual Market Policy Count Policy Year 2005 in Thousands Data is evaluated as of

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Florida Workers Compensation Rate Filing Overview August 29, 2006 Tony Di. Donato 561 -893 -3116 Lori Lovgren 561 -893 -3337 1 © Copyright 2006 National Council on Compensation Insurance, Inc. All Rights Reserved.

Florida Workers Compensation Rates 1/1/07 10/1/03 to 1/1/07* Manufacturing Contracting Office & Clerical Goods & Services Miscellaneous -13. 0% -13. 6% -13. 8% -12. 9% -13. 3% -34. 8% -40. 0% -35. 7% -38. 6% -43. 0% Overall Average -13. 3% -38. 9% *Assuming approved as filed 2 © Copyright 2006 National Council on Compensation Insurance, Inc. All Rights Reserved.

Declines in Claim Frequency Have Contributed to Florida’s Improving Results SB 50 A Effective 10/1/03 Based on NCCI’s financial data. Frequency of lost-time claims. 3 © Copyright 2006 National Council on Compensation Insurance, Inc. All Rights Reserved.

Rolling 12 Mos Avg Lost-Time Claims Per 1, 000 Employees SB 50 A Effective 10/1/03 Data from Current Employment Statistics, Office of Labor Market Statistics, Florida Agency for Workforce Innovation 4 © Copyright 2006 National Council on Compensation Insurance, Inc. All Rights Reserved.

Florida’s Average Indemnity Severity in Excess of Wage Growth Excluding On-Levels SB 50 A Effective 10/1/03 Based on NCCI’s financial data for lost-time claims developed to ultimate, but NOT at current benefit level. 5 © Copyright 2006 National Council on Compensation Insurance, Inc. All Rights Reserved.

Florida’s Average Medical Severity in Excess of Wage Growth Excluding On-Levels SB 50 A Effective 10/1/03 Based on NCCI’s financial data for lost-time claims developed to ultimate, but NOT at current benefit level. 6 © Copyright 2006 National Council on Compensation Insurance, Inc. All Rights Reserved.

State Voluntary Market Filings Southeastern NAIC Zone South Carolina* 11/1/05 +32. 9% North Carolina 4/1/06 +9. 4% Alabama 3/1/06 +5. 0% Tennessee 3/1/06 +1. 6% Arkansas 7/1/06 -0. 5% Louisiana 5/1/06 -0. 6% Georgia 7/1/05 -1. 3% Mississippi 3/1/06 -1. 9% Virginia* 4/1/07 -7. 9% 10/1/06 -9. 3% 1/1/07 -13. 3% Kentucky* Florida* * Pending 7 © Copyright 2006 National Council on Compensation Insurance, Inc. All Rights Reserved.

NCCI Survey Findings (June 2006) • NCCI interviewed 11 of the top Florida writers (69% market share total; primarily claims personnel) on key components of the reform: • Permanent Total (PT) – 7 of 11 have experienced fewer PT’s. – 4 of 11 seeing no change in number of PT’s. – Some mention they expect more activity on PT’s as more cases reach the 104 week mark. – 3 of 11 mention medical down to extent there are fewer PT’s or cases are closing faster. – Most agree “sedentary employment qualification” not a significant factor at this point. – 3 of 11 mention that PT’s are less litigious. 10 © Copyright 2006 National Council on Compensation Insurance, Inc. All Rights Reserved.

NCCI Survey Findings (June 2006) • Attorney Fees – 4 of 11 see number of litigated cases down. – 5 of 11 see no change in number of cases with claimant attorney involvement. – 8 of 11 see cases settling quicker. – Some mention that claimant attorneys are still trying creative ways to generate fees outside the fee schedule. – Some see claimant attorneys holding onto to new law cases hoping a judicial decision will permit hourly fees again. – 5 of 11 mention that claimant attorneys are holding onto old law cases. • Compensability Standards – Most are having success with one or more of the standards. – “Major contributing cause”, “clear and convincing evidence”, apportionment making the most difference. 11 © Copyright 2006 National Council on Compensation Insurance, Inc. All Rights Reserved.

NCCI Survey Findings (June 2006) • Psychiatric Impairment – 9 of 11 seeing less requests for psych. – 5 of 11 mention that add-on is now significantly reduced (3 to 15% before 50 A and now limited to 1%). – 4 of 11 mention that requests for pain management are up. • Independent Medical Exams (IME’s) – 9 of 11 said # of IME’s down for variety of reasons—less litigation, less attorney involvement, carrier may not be willing to pay for more than one. – 5 of 11 said that if injured workers chooses doc on managed care list, carrier will pay for more than one. – Little to no use of consensus IME’s. 12 © Copyright 2006 National Council on Compensation Insurance, Inc. All Rights Reserved.

NCCI Survey Findings (June 2006) • Dispute Resolution – Some see more efficient resolution in some parts of state (north/central, not in south). – Some see fewer and more specific petitions. – Some having success with judges dismissing for lack of specificity. – Little to no use of binding arbitration. • Training and Education Benefits 1. 5 of 11 said that the value of this benefit used to be included in settlement negotiations. 2. 6 of 11 said no change. 13 © Copyright 2006 National Council on Compensation Insurance, Inc. All Rights Reserved.

NCCI Survey Findings (June 2006) • Hospital, Physician and Drug Costs – Hospital: 5 of 11 said no impact; 4 mention seeing hospitals shift costs to surgeries and hardware. – Physician: 9 of 11 say provider participation not improved. – Drug: 10 of 11 say drug costs not improved. • Practice Parameters and Standards of Care—Most found no change. • Other concerns – Medicare set-asides—delays are costly; extends benefits six to nine months – Civil suits—Aguilera, Jones vs. Martin Electronics—claimants bar threatening civil suits in effort to extort higher workers comp settlements – Increasing fines and penalties from the FL DWC 14 © Copyright 2006 National Council on Compensation Insurance, Inc. All Rights Reserved.

Number of Petitions Filed/New Cases FY 2003 FY 2004 FY 2005 FY 2006 Petitions Filed 154, 931 131, 198 108, 743 90, 803 New Cases Filed* 126, 759 64, 470 38, 827 36, 873 *First petition filed in case Data from FL Division of Administrative Hearings 16 © Copyright 2006 National Council on Compensation Insurance, Inc. All Rights Reserved.

Florida Written Premium 2005 p: Preliminary based on NAIC Annual Statement data. 18