Massachusetts insurance commissioner Joseph Murphy will hold a public hearing March 30 to examine a rate increase request from The Workers’ Compensation Rating and Inspection Bureau of Massachusetts (WCRIB).
The request, filed on March 1, calls for a 19.3 percent hike in average rates for industrial classes and a 20.0 percent increase for F-Classes. If approved, the average rate increase would go into effect in September.
WCRIB is a private non-profit association of insurers. It is licensed by the Massachusetts Division of Insurance as a rating organization for workers’ comp insurance in the state.
WCRIB said it recognizes that the request calls for a significant rate increase — but the group pointed out that it’s been more than a decade since the workers’ comp rate rose in Massachusetts.
The last rate hike was in 2001, when it went up by 1 percent. WCRIB had requested small rate increases in 2008 (2.3 percent), 2010 (4.5 percent), and 2011 (6.6 percent) but none went into effect.
“If these three small increases in rates had been granted by the Commonwealth, we would not need such a significant rate increase now,” said Paul Meagher, President of WCRIB. “As our rate filings demonstrate, we have long been an advocate for fair and predictable workers’ compensation insurance rates.”
Meagher added that current rates are nearly 65 percent lower than they were in 1991, when reforms to the workers’ compensation act took effect. “Even if our rate filing is approved by the Commonwealth, rates will still be nearly 58 percent lower than they were in 1991,” he said.
The Massachusetts Office of Consumer Affairs & Business Regulation said this week that the hearing will offer “all interested persons an opportunity to provide evidence and testimony relating to the proposed workers’ compensation classifications, risks and rates.” The office said the hearing will assist the commissioner in determining whether the proposed classifications and rates are excessive, inadequate, or unfairly discriminatory for the risks to which they apply and whether they fall within a reasonable range.
The industry’s rate filing is based on the actual experience of insurers providing workers’ comp coverage in Massachusetts. It reflects the costs of claims (lost wages and medical care) and the expenses insurers bear to run their business. WCRIB also noted that:
• Recent trends indicate that the average cost of claims or “claim severity” has risen steadily, even as the number of claims overall are decreasing.
• Lost wage payments are a function of average weekly wages, which have increased 27.5 percent since the last rate increase in 2001. Health care costs, which account for 40 percent of the benefits paid to injured workers, have also risen steadily over the last decade.
• The costs of doing business have been increasing at the same time that insurers’ opportunities to offset underwriting losses with investment income have diminished in the wake of historically low interest rates.
“While we recognize that the current filing calls for a significant rate increase, it reflects the real costs of providing this kind of insurance. Without a rate increase, we will be unable to maintain a competitive market for workers compensation insurance in Massachusetts,” said Meagher.
If rates continue to be held flat or further decreases are ordered, employers will continue to have fewer and fewer options when they turn to the market for workers’ compensation insurance, he added.
“We are already seeing an increase in the number of employers who are forced to obtain coverage through the Massachusetts Residual Market, which is the market of last resort, but now provides insurance to more than 25 percent of the employers in Massachusetts.”
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