N.Y. Nixes Workers’ Comp Hike; Blasts ‘Anemic’ Anti-Fraud Efforts

New York officials have denied a requested 7.5 percent hike in workers compensation premiums and criticized carriers’ attitude towards combating fraud in doing so.

The decision means rates will not be going up in October as insurers had hoped.

“The insurance department is disapproving the rating board’s request because our detailed analysis of the application demonstrated that an increase is not warranted,” said N.Y. Insurance Superintendent Howard Mills.

“The statistical data that was submitted as part of the rating board’s application, and the testimony received at the public hearing, indicate the workers’ compensation market in New York remains quite profitable.”

The rate request had been made by the New York Compensation Insurance Rating Board on behalf of insurers.

In his ruling, Mills criticized the workers’ compensation carriers for their “collective unwillingness to expand anti-fraud efforts despite being given new and enhanced tools” granted by the Legislature in 1996 to combat the problem.

“Now, an entire decade after the enactment of that landmark reform legislation the insurers efforts to fight fraud — both claimant and employer fraud – can be said to be anemic, at best,” the decision stated.

The NYCIB presented information at a June public hearing indicating that for the seven policy years running from 1997 to 2003, the total underwriting savings to the insurers is $12,579,670 or less than $2 million annually for all the carriers doing business in the state.

“The paucity of fraud savings in an industry which experiences fraud costs of approximately $5 billion per year, according to the National Crime Bureau, is most unsettling,” the decision stated.

Mills cited one carrier’s report (on anti-fraud initiatives) that indicated that the carrier referred only 320 claims for investigation to its Special Investigation Unit out of a total policy count of over 40,000.

“Without a greater commitment on the part of workers’ compensation carriers in New York to fight fraud, this department is hard pressed to justify any new overall average rate increases,” Mills stated.

The rate denial follows slight increase of five percent granted in 2005 and no increase in 2004. The following chart illustrates the changes since 1995:

Year % Rate Change
1995 -8.4
1996 -18.0
1997 -7.5
1998 -3.2
1999 0
2000 – 2.5
2001 0
2002 0
2003 +1.7
2004 0
2005 +5
2006 0

Source: NYSID