Following last week’s rejection of the industry’s request for a 29.3 percent hike in New York workers compensation rates, insurers have cautioned that the decision could eventually make it tougher for employers to find the coverage they need
According to the Property Casualty Insurers Association of America (PCI), the concern over higher rates is understandable. However, rates must reflect the costs of the system if insurers are to be expected to write the coverage, PCI noted.
“It does no one any favors to force rates to be below what needs to be charged. If rates continue to be inadequate, it may impact business operations and the willingness of some insurers to write in the state,” Keith Bateman, PCI vice president of workers’ compensation, said in a statement.
In disapproiving the filing submitted by the New York Compensation Insurance Rating Board that recommended an overall increase of 29.3 percent, the state insurance department found that the data submitted by the rating board did not warrant the increase. The current rate level remains in place.
In his decision, Superintendent of Insurance Greg Serio questioned the need for a rate increase in light of a 4.5 rate of return in 2003 and an expected 4.1 rate of return in 2004 for the workers’ compensation industry.
PCI disputed this reasoning, arguing that such a rate of return is not even half of the return Fortune 500 companies’ receive, which ranges from 12 to 15 percent. Workers’ compensation insurers are actually at a disadvantage for attracting badly needed capital because of their profitability levels compared to other companies and industries, Bateman maintained.
“The department’s ruling is not a victory for employers,” Bateman said. “Rates should be predictable, not suppressed. Roller-coaster rates aren’t in either business’ or insurers’ interest. Unfortunately, the department’s action could decrease the likelihood that the Legislature will take seriously the much-needed reform efforts for the workers’ compensation system.”
The industry is weighing its options which include appealing in court, refiling for a lower amount, or accepting the decision.