For Immediate Release - August 30, 2012

AG Coakley Applauds Rejection of $175 Million Rate Hike in Workers' Compensation Insurance

Coakley’s Office Argued Against Proposed Increase Before Commissioner of Insurance

BOSTON – An industry-planned rate hike for workers’ compensation that could have cost Massachusetts businesses $175 million was blocked today following opposition by Attorney General Martha Coakley’s Office.

The Commissioner of Insurance today rejected the proposed $175 million rate request by the insurance industry. AG Coakley’s Office argued before the Commissioner of Insurance that the rate request was unjustified because it had based the figures on inflated net loss trends and unreasonable projections.

Rates for workers compensation insurance are set at least every other year in an administrative rate hearing before the Commissioner of Insurance. Massachusetts businesses are required to purchase workers compensation insurance to provide coverage for expenses and lost wages of workers injured on the job.

“The industry’s request to raise rates could not have come at a worse time for small businesses in Massachusetts,” AG Coakley said. “We believed the proposed rate hike was completely unjustified, and we litigated to stop it. Blocking the rate increase helps ensure that companies’ do not overpay for workers compensation insurance, reducing the cost of doing business here in Massachusetts. We applaud the Division of Insurance for this decision today.” 

Insurance companies, including giants Liberty Insurance, AIG, and Traveler’s Insurance Co., among others, mutually agreed on a proposed rate hike and then sought approval from the Commissioner of Insurance. In the administrative rate trial completed last month, industry witnesses said that the proposed filing provided sufficient justification for adding another $175 million in premium charges onto the bills of Massachusetts employers, including small businesses.                            

The AG’s Office demonstrated during the rate trial that the industry’s proposal was based on inflated net loss trends, unreasonable projections of future expenses and a profit provision that underestimated the amount of money the insurers would make on premium investments by over 100 percent.

Additionally, AG’s initial discovery in the case revealed that the industry had miscalculated expense trends by using the wrong set of relevant dates. After the AG’s Office identified this initial error the insurers lowered the aggregate proposed hike by approximately $5 million.  

After reviewing the evidence in the rate trial, the Commissioner of Insurance rejected the rate hike in its entirety. The decision will save Massachusetts workers compensation insurance customers approximately $175 million compared to the rates they would have paid if the proposed rate hike was approved.

The Attorney General’s Insurance and Financial Services Division represents the public interest in these rate trials, and advocates for fair rates for insurance customers. Between 2007 and 2011, the AG’s Office obtained approximately $340 million in savings for employers and small businesses by intervening in workers’ compensation insurance administrative rate cases. Including today’s victory, Attorney General Martha Coakley has now saved Massachusetts workers’ compensation insurance customers more than $500 million.

This matter was handled by the experts and attorneys of the Attorney General’s Insurance and Financial Services Division.

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