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ALABAMA WORKERS COMPENSATION SYSTEM REFORMS TEMPER INSURANCE INDUSTRY REQUEST FOR RATE RELIEF

 MONTGOMERY, Ala., June 4 /PRNewswire/ -- At today's hearing on workers compensation rates, the National Council on Compensation Insurance (NCCI) testified that Alabama's workers compensation premium must increase an overall average of 17.5 percent in order to cover costs.
 "Although current data supports a needed increase in workers compensation premium, the amount of that increase has been significantly reduced to reflect expected savings associated with workers compensation system reforms enacted in 1992," explained Robert Maxwell, director of Government, Consumer and Industry Affairs for NCCI. "In the absence of these system changes, a substantially larger increase in premium would have been necessary to cover the growth in claims costs."
 The NCCI filings, originally proposed to be effective Nov. 1, 1992, recommended a 24.8 percent increase in assigned risk rates and indicated a 12.3 percent increase in loss costs for the voluntar would represent the overall average increase of 17.5 percent.
 By an Insurance Department rule introduce only for the assigned risk plan, which covers employers that are unable to find an insurance company willing to provide the coverage voluntarily. For the majority of employers written voluntarily by insurance carriers, NCCI submits separate statistics -- known as loss costs -- which represent the claims cost portion of each rate. Individual insurance companies may use these loss costs and their own overhead expenses in developing and filing final rates with the insurance commissioner.
 According to Maxwell, "The substantial delay in consideration of these filings has further increased the need for rate relief due to continuing escalation in claims costs. We believe that savings from recently implemented hospital reimbursement rates have the potential to largely offset this growth in claims costs." Hospital reimbursement rates for workers compensation cases were negotiated with hospitals statewide by the Department of Industrial Relations this year.
 Maxwell testified that the "alarming rate of growth in the cost of the average workers compensation claim is a major indicator of the increase in system costs. In just four years, the average cost per lost-time claim doubled from $8,230 to $16,409.
 "Skyrocketing claims costs and inadequate workers compensation rates have staggered insurers with unprecedented losses from underwriting workers compensation insurance in Alabama. Since 1986, insurance carriers have incurred an average of $1.29 in losses and expenses for every dollar of workers compensation premium," Maxwell said.
 Approximately 43 percent of workers compensation premium is written through the assigned risk plan today, compared to only 5.5 percent in 1983. This bulging population of employers in the assigned risk plan provides further evidence that the workers compensation insurance market continues to be troubled.
 "Although system reforms implemented in 1992 and 1993 offer hope for improved results, the requested increase in workers compensation rates is essential if premiums are to be adequate to cover system costs," Maxwell said.
 The National Council on Compensation Insurance, headquartered in Boca Raton, Fla., is a voluntary, nonprofit, statistical and ratemaking organization. Supported by membership assessments and the sale of products and services, NCCI compiles statistics on workers compensation and provides advisory rates or information to be used for establishing rates in 32 states. It also serves as statistical advisor for about half of the remaining states. Members of NCCI include stock companies, mutual companies, competitive state funds, and reciprocals.
 -0- 6/4/93
 /CONTACT: Robert Maxwell Jr. of the National Council on Compensation Insurance, 205-991-7597/


CO: National Council on Compensation Insurance ST: Alabama IN: INS SU:

JB-DB -- FL002 -- 5328 06/04/93 09:06 EDT
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Date:Jun 4, 1993
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