New York’s New Comp Rate Draw’s Fire
By Daniel Hays
NU Online News Service, Sept.2, 2:49 p.m. EDT?A New York regulator’s decision last week to grant only a 1.7 percent rate increase for workers’ compensation insurance could have dire consequences for the state, the head of a trade group warned today.
Bernard Bourdeau, president of the New York Insurance Association in Albany, made his comments when asked his reaction to New York Insurance Superintendent Gregory V. Serio’s decision to reject an advisory rate service’s recommendation to raise rates.
“You put off the indicated number for a few years and you create a crisis,” said Mr. Bourdeau.
The advisory New York Compensation Insurance Rating Board first recommended 11.3 percent for an increase and then, after a hearing, filed a request for 3.7 percent.
Mr. Bourdeau said insurance companies in the state “really believed the rate should have been in the seven to 10 percent range. All the data suggests that’s where it should be.”
Mr. Serio in announcing an average rate figure lower than that recommended by the New York Compensation Insurance Rating Board, said they had not supported their recommendation during a public hearing.
In an announcement, he noted that New York State has seen an overall reduction of 33 percent since 1995?a 27 percent reduction since reforms were legislated in 1996. During the period from 1995 through 2002 comp rates declined or were stable.
“The Department continued to work aggressively with NYCIRB after their filing requests failed to adequately address the department’s concerns resulting in the Department’s final determination that a 1.7 percent overall rate increase is adequate,” Mr. Serio said.
According to Mr. Serio, the 1.7 percent amount will give the New York workers’ comp market place “continued stability.”
Mr. Bourdeau said for a long period of time companies had filed for deviations below the minimum rate for workers’ comp, but “we’re at a point now where companies have gotten rid of all the special programs below the manual rates. This year a rate increase is in order.”
He suggested fewer companies might write the workers’ comp line putting a burden on the State Insurance Fund. And “if the State Insurance Fund can’t make money writing this, then the taxpayers are going to have to pay. It’s a dangerous game.” State Fund assets, are insufficient and rely on “an I.O.U.” from the state, according to Mr. Bourdeau.
The rate decision will take effect Dec. 1, and will be reflected in rate notices that insurers will send to employers immediately.
All workers’ compensation insurers supply statistics to the New York Compensation Insurance Rating Board, which it evaluates the data before making its rate proposals, the department said.
Mr. Serio said in his announcement that employers’ comp costs had gone down since the 1966 legislative changes that helped abate fraud and reduced employer liability.
In 1995 rates were reduced by 8.4 percent, and in 1996 rates fell by 18 percent. In 1997, rates decreased an additional 7.5 percent and in 1998 rates were cut by 3.1 percent. After an unchanged rate level in 1999, rates declined 2.5 percent in 2000 and remained stable in 2001 and 2002.
Prior to the enactment of Gov. George Pataki’s reform legislation, New York State had the second highest workers’ compensation costs in the United States, the department said.