A South Carolina administrative law judge ruled recently that workers' compensation loss costs may be increased by 18.4 percent, effective Dec. 1.
As a result, state businesses will once again face double-digit increases in their workers' comp costs, said Robert Herlong, vice president and regional manager for the Property Casualty Insurers Association of America.
"Over the past three years premiums have jumped over 30 percent," Mr. Herlong said. "However, the pace of premium increases is not keeping up with costs."
The rapidly increasing costs, coupled with the large assessment for the Second Injury Fund, create an unstable environment for workers' comp insurance, said Mr. Herlong.
Originally, the Second Injury Fund was set up after World War II to encourage hiring of injured veterans by easing the burdens for employers if they received a second injury. But, according to Mr. Herlong, the fund has been abused in recent years.
"We have reached a crisis situation that requires the Legislature to enact significant reform," he said.
While the administrative judge reduced the 33 percent increase recommended by the National Council on Compensation Insurance, Mr. Herlong said the increase that was approved confirms that costs continue to jump dramatically.
In recent years, medical and indemnity costs, attorney involvement and Second Injury Fund assessments have increased sharply in South Carolina. As an example, the state's Second Injury Fund increased its assessment by nearly 100 percent, to more than $250 million in 2005.
"Reform of the workers' compensation system, including the repeal of the Second Injury Fund, will continue to be among the top legislative priorities for the business community and insurers," said Mr. Herlong.
Reform legislation, that Mr. Herlong said would have cut workers' comp costs, passed the House earlier this year but failed in the Senate.
Mr. Herlong said he expects similar legislation to be introduced in the 2007 session when it convenes in January.
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