NY Regulator Rejects Insurers Comp Hike Advice

An insurers trade group, the New York Insurance Association, responded that Mr. Serio had ignored verifiable data and, based on conjecture, was making a decision that would limit competition.

The rate boost recommendation was submitted by the New York Compensation Insurance Rating Board, an association of more than 300 workers' comp carriers in the state, which has not decided how to respond to the superintendent's decision.

"We have to speak to the membership to decide what our action will be," said Monte Almer, president and chief executive officer of NYCIRB.

He said the range of possible responses, included refiling the rate request, taking no action or taking the issue to court.

Mr. Serio, who last year granted a 1.7 percent increase, held three public hearings on the issue. He noted that the industry reported a rate of return of 4.1 percent this year and 4.5 percent in 2003.

His department believes, he said, that the actual rate of return is closer to 8.1 percent.

"Preposterously, NYCIRB represented that industry-wide savings from fraud detection and prevention were $297,000 in losses and $3,676,000 in premiums," Mr. Serio's opinion stated.

He said in an interview that those figures either showed that insurers in fighting fraud "clearly are not doing enough by their own admission" or that they were failing to properly account for the effects of fraud fighting.

The NYCIRB figures represented 0.2 percent of insurers' premium, his decision said, and given estimates that fraud costs businesses 10 percent of premium, "there is much more the companies must do in this area," Mr. Serio said.

His department found that NYCIRB's filing did not account for the affects of Section 32 of comp law, which allows insurers to make lump-sum claim settlements at "significant savings."

Bernard Bourdeau, the Albany, N.Y.-based New York Insurance Association president said it is "disappointing when a government office engages in price suppression in the face of overwhelming evidence that prices should be higher."

If Mr. Serio believed in free markets, he would let the hike go through and "let competition drive the rates down to a true market level."

Next year, he predicted more New York businesses will have "to buy their insurance from the government-run insurance company."

"We submitted data that's verifiable and all we get is conjecture from them [the insurance department]," Mr. Bourdeau commented.

Mr. Serio responded: "We found losses were declining. We're not supposed to justify their rate."

He said the department had "tried to lay out a roadmap for them" and insurers had submitted a filing with "the same shortcomings as last year."