View this article online: https://www.claimsjournal.com/news/east/2005/03/01/52065.htm
The Workers Compensation Rating and Inspection Bureau of Massachusetts (WCRIB) has recommended to the state Division of Insurance that average rates for workers’ compensation insurance be increased by 1.0 percent effective Sept. 1, 2005.
The WCRIB is the licensed rating organization that files rates with the Division of Insurance on behalf of insurers writing workers’ comp coverage in Massachusetts.
According to officials, the rate filing does not rely upon data from American International Group or its subsidiaries, which combined make up about 25 percent of the market. The accuracy of the AIG data has been questioned by the DOI’s rating bureau. A final decision on whether the state would accept the AIG data is still pending, requiring WCRIB to file without it in order to meet its March 1 deadline.
The WCRIB’s proposed 1.0 percent increase in rates, if approved, would be the first increase since 2001, when the commissioner approved a 1.0 percent increase following a series of five double-digit decreases between 1993 and 1999 that cut rates by 58 percent.
The commissioner also ordered a 4.0 percent decrease in rates in 2003. Even if the WCRIB’s proposed rate increase is approved, the rates will still be less than half of what they were 15 years ago, according to the rating bureau.
“The WCRIB is concerned about the adequacy of current workers’ compensation insurance rates,” said WCRIB President Paul Meagher. “Any further reduction in rates will result in an inadequate rate level that could drive more employers into the residual market and reduce market stability.”
In recent years, the voluntary market in the state has shrunk. Employers not insured voluntarily by an insurance company must be covered by the residual market.
From 1999 to 2004, close to 30,000 insureds moved from the voluntary market into the residual market, which increased in market share from 4 percent to nearly 20 percent, making the residual market the state’s second-largest writer of workers’ comp insurance.
Meagher maintained that in recent years, wages and medical costs have increased by nearly 40 percent – causing a “significant increase in the benefits” paid by workers’ compensation insurers.
In addition to higher medical and wage costs, reinsurance costs for insurers have risen and the availability of this coverage has declined, especially in the wake of the Sept. 11, 2001 terrorist attacks, Meagher added.