The insurance world is filled with legalities. Regulations change each and every day. Many claim this is to keep the industry as honest as possible. One legality regarding increasing costs revolves around applying for any price increase over 7% in the state of New York.
The law was created to prevent insurance companies from significantly increasing prices without going through legal proceedings proving that the cost is justified. As such, on May 13 the New York Compensation Insurance Rating Board (NYCIRB) filed a petition with the Department of Financial Services requesting a 9.3% overall loss cost increase.
How It Works
After the NYCIRB petitioned the Department of Financial Services, a hearing was scheduled for June 28. The proceedings were held in the Department's State Street office in New York City. Along with the NYCIRB, the Department will oversee the hearing with the superintendent and her staff.
NYCIRB used two years of policy data to calculate the overall loss cost, using a number of multiplicative factors.
Understanding the Testimony
Throughout the hearing, nine individuals testified for or against the proposed rate hike. The statements revolved around a number of factors. Seven individuals testified in favor of the increase. Two people believed the hike was not justified. These individuals saw the increase as another attempt to charge the “little guy” more money, while corporations continued to line their pockets.
Those who testified for the increase included individuals from the Workers' Compensation Board, members of the NYCIRB, private insurance carriers, and more. The focus of those speaking in favor of the increase was to refer back to the data and remind the superintendent that companies must turn a profit to stay in business.
The main argument stated that new insurers wouldn't enter the marketplace if it's nearly impossible to make money in the industry. With less competition, individuals seeking coverage will have fewer options, and all industries working toward a monopoly are inefficient.
The End Result
Not only did the Department of Financial Services hear in-person testimonies, but they also took written submissions into account before making their final decision. Collectively, a few groups wrote in to the hearing with objections. Two groups which offered strong opposition included the New York State AFL-CIO and the Business and Labor Coalition of New York. These groups opposed the filing because of the potential cost increases, employers and workers would incur. Both groups ignored the fact that the loss cost calculations must be considered in the decision.
After deliberation, the Department of Financial Services made their decision. The Department recognized that maintaining a healthy workers' compensation system is absolutely vital to the health of the economy of the great state of New York. The superintendent knew the decision was necessary, as it would affect many New Yorkers.
While price increases are typically frowned upon, the Business Council of New York State and their support for the increase ultimately swayed the Department. As the state's largest employer association, it was illuminating that this group was fully in favor of an increase.
As such, the Department of Financial Services ended up approving the NYCIRB’s application for a 9.3% increase. The rate hike should become active on October 1.
If you have questions about workers compensation contact Skyline Risk Management, Inc. at (718) 267-6600 to voice your concerns.