WORKERS COMP INSURERS MEET DETOURS ON ROAD TO PROFITS

WORKERS COMP INSURERS MEET DETOURS ON ROAD TO PROFITS

The chief obstacle workers compensation insurers face as they try to restore profits may be state officials' continued opposition to rate increases, according to a leading industry official.

At the annual issues symposium of the National Council on Compensation Insurance, President Kevin M. Ryan said workers compensation insurers are troubled by state attorneys general and other groups' growing opposition to rate increases. He added that states with the most severe rate inadequacies produce the most opposition.Although events of this kind are not yet the norm, neither are they isolated instances, Mr. Ryan said Wednesday in a speech that opened the two- day meeting. And while there is no doubt that we should be obliged to prove our case when requesting rate increases, we feel that the burden of proof in the regulatory arena is sufficient.

To extend that burden to the political arena does no one - neither employers, insurers, nor, most importantly, injured workers - any good at all.

Under the state-regulated workers compensation system, an employee gives up the right to sue even when the employer's negligence caused the employee's injuries. In return, the employer is liable for the costs of medical treatment and wage loss benefits, regardless of who was at fault.

In his remarks, Mr. Ryan said he was referring to recent attempts by attorneys general and other groups in several states, including Maine, Louisiana, Texas, Oklahoma and Iowa, to oppose or overturn rate increases.

A spokesman for the Texas Attorney General's office said the state is not opposed to the industry's attempt to make a profit.

We're opposed to the financial raping of small business owners who have to buy workers comp insurance for their employees, said Elna Christopher, press secretary for Attorney General Jim Mattox. We're not saying they can't make a profit, but they can't do it by climbing over the back of small businesses and stomping on them. It's not good for the overall economy.

Michael Camilleri, a senior vice president and general counsel for the council, said Mr. Ryan's remarks did not pertain to the recent antitrust lawsuits filed against the insurance industry. Attorneys general in eight states charged more than 30 U.S. and British insurers with conspiracy, boycott and other antitrust violations. Texas filed a similar suit in state court.

The Insurance Services Office Inc., a rate-making and advisory office for the insurance industry, was included among the defendants.

Mr. Camilleri said although the council provides a similar service for workers compensation insurers that ISO does for its insurer members, the council does not believe that it could becharged with similar violations.

Our line of insurance is a creature of statute. And on a substantive basis, we don't belives the allegations (federal suits) have any merit, Mr. Camilleri said. ISO was merely doing what was consistent with state law and approved by regulators.

Mr. Camilleri said the policy forms that the council develops for insurers must conform to the provisions outlined in each state's workers compensation laws. Workers compensation protection is compulsory for most workers in most states. State insurance regulators set the rates that private insurers, which hold about 70 percent of the market, can charge their policyholders. Benefit levels are set by each state's legislature.

He added that only about a dozen states have open rating laws that allow insurers to request rate increases.

In other remarks at the symposium, Mr. Ryan said he expected industry results to show continued improvement this year.

The industry's combined loss ratio was 118 percent in 1987, an improvement

from the 121 percent figure recorded in 1986. Mr. Ryan said he predicts the industry will record a combined loss ratio, which measures premium income against underwriting losses and expenses, of 113 percent to 114 percent in 1988.

Again this represents a change for the better, but it is not yet enough. At that level, workers compensation will produce calendar year operating results, inclusive of investment income, that are barely at the break-even points, he added. Insurers will receive virtually no return for undertaking the underwriting risk.