Bad Market Blamed for Workers' Comp Crisis
Sarasota Herald-Tribune
March 3, 2003

Insurance companies blame the workers' compensation crisis on greedy lawyers and the rising cost of benefits paid to injured workers.

Workers advocates counter that the real cause is how insurance companies mismanage investments.

The industry made billions investing premium dollars in stocks and bonds in the late 1990s, which allowed them to reduce insurance rates.

Over the past three years, with investment income plunging along with the stock market, insurance companies have been forced to call for higher rates and to become more selective about customers.

That, according to advocates for injured workers, is what has caused the current crisis.

"Remedies that do not specifically address the insurance industry's mismanagement will fail to stop these wild price gyrations in the future, leaving America's insurance consumers at risk every 10 to 15 years," Americans for Insurance Reform, a New York-based consumer advocacy group, wrote in a letter to state insurance commissioners.

…

J. Robert Hunter, a former Texas insurance commissioner and co-founder of Americans for Insurance Reform, wants regulators to set minimum prices to dissuade carriers from getting into price wars to gain market share at times when their investment returns are high.

But to work, Hunter's proposal would have to be adopted nationally, he said. An insurance company that lost money by charging too little in one state might have to raise prices in another state to make up those losses.

For a copy of the complete article, contact AIR.