AIA: PROPOSED WORKERS' COMP REFORMS A START

The American Insurance Association termed proposed reforms by Gov. Rod Blagojevich to Illinois' troubled workers' compensation system a "good beginning," but added that more work remains in order to truly fix the system.

In his State of the State address, Blagojevich made workers' comp reform one of his priority goals this year. The governor, a Democrat, is seeking to eliminate "balance billing," under which injured workers are unfairly dunned by medical providers and their collection agencies. Illinois is one of only a handful of states that continue to permit this practice.

Additional reforms recommended by the AIA include: implementing American Medical Association impairment guidelines to reduce subjectivity in making injury determinations; using a Medicare-based fee schedule to make medical costs more stable and predictable; allowing for utilization review, which standardizes medical treatment and curbs unnecessary, costly medical treatments to help get the injured worker back on the job sooner and healthier.

HOMEOWNERS RATES 4TH LOWEST IN NATION

Ohio insurance consumers continued to benefit from a healthy property/casualty market in 2004 and rates are not expected to change significantly in 2005, the state's insurance department announced. Homeowners insurance rates offered by the state's top ten insurers rose less than two percent in 2004 and automobile insurance rates rose at two-tenths of a percent. Both markets experienced their smallest increase in four years.

"Ohio has consistently ranked among the lowest premium states for both homeowners and auto, ranking 4th and 16th lowest respectively," said Director Ann Womer Benjamin. "Ohio consumers continue to benefit from a healthy and competitive market."

According to the department's property/casualty division, homeowners insurance rates across the state rose 10.3 percent in 2003, following an 18.1 percent rise in 2002. In 2004, rates rose only 1.9 percent statewide. State Farm, Ohio's largest home insurer with 22.6 percent of the market, dropped their rates nearly 5 percent while most other companies implemented small increases.

Over each of the past three years, auto rates have risen at slightly above 4 percent. In 2004, the average increase was only two tenths of a percent, considerably less than the three-year trend. State Farm, Nationwide and Erie insurance companies all implemented drops in rates according to the department. Other companies implemented small increases in the auto market. Department analysts expect that 2005 rates will rise moderately. Increases in homeowners insurance can be attributed to building and materials costs and weather-related losses, while auto insurance increases are associated with new vehicle and repair costs, medical costs, and weather.

DOI ISSUES STUDY ON BOOMING LONG-TERM CARE RATES

Premiums have increased for some long-term care insurance policies issued to Minnesota consumers largely because policyholders are maintaining their coverage and interest rates have decreased in recent years. Those findings are contained in a Minnesota Department of Commerce report on the current long-term care insurance market in the state.

Minnesota Commerce Commissioner Glenn Wilson asked his staff to study LTC rates in Minnesota after hearing from some consumers about recent rate increases. Some policy premiums have increased by as much as 45 percent within the last year. The department's review concluded that rate increases have been the result of two primary factors:

(1) Reduced policy lapse rates: Most companies assumed that policy lapse rates--the proportion of policyholders that stop paying premiums and let their policies terminate each year--would continue at historical levels of 10 to 15 percent of policies each year for the first few years after policy issue, and 4 to 6 percent per year in later years. However, those levels have reduced dramatically in the last five to nine years. The premium rates are now much less likely to be sufficient to cover the total anticipated claims.

(2) Reduced interest rate earnings on investments: Ten years ago, a typical long-term interest rate assumption might have been around 7 percent to 9 percent. It was impossible to foresee that long-term interest rates would drop to about half of that level. This change had a dramatic impact on the ability of companies to provide the promised benefits at the existing rates.

At the end of 2003, about 113,000 individuals were covered under long-term care insurance in Minnesota, according to a report from the National Association of Insurance Commissioners based on insurance company filings. About half of these individuals have received increases in their rates ranging from 10 percent to 45 percent since 2002. Prior to this time, LTC rate increases had been relatively rare.

BILL WOULD TOUGHEN INSURANCE FRAUD PENALTIES

Strengthening Indiana's weak insurance-fraud law will raise Indiana's fraud statute to a par with other states, the Coalition Against Insurance Fraud told key legislators in testimony recently.

According to the Coalition, Indiana's insurance-fraud law is one of the weakest in the country because it covers only bogus claims, and imposes just one penalty for all insurance cons, no matter how much money is stolen.

HB 1403 would make premium and application scams specific insurance crimes in Indiana. It also would increase jail terms to eight years, up from the current one year, for insurance frauds that steal more than $2,500. Some 45 states have insurance-fraud laws on the books, according to the Coalition. But Indiana's law is one of just a handful that doesn't address premium and application scams, two significant sources of fraud losses, according to one the group's lobbyists, Howard Goldblatt.

Massachusetts passed a tough bill cracking down on widespread staged accidents late last year, and there are widespread projections that the new law will help reduce upward pressure on auto premiums, Goldblatt noted.

"We would expect a similar impact on premiums for various lines in Indiana if the state boosts its own anti-fraud efforts with a tougher law," Goldblatt said. HB 1403 will give prosecutors better tools to convict all insurance swindlers. The threat of longer jail sentences and larger fines also will help deter many would-be con artists, Goldblatt said. The bill has broad support in the state, and was initiated by the Indiana chapter of the International Association of Special Investigation Units.