AIA Throws Support Behind Mass. Workers’ Comp Competitive Rating Bill

A bill that would bring a competitive rating system to the Massachusetts workers’ compensation system would be good for the state’s economy, according to the American Insurance Association (AIA).

AIA testified before the legislature’s Joint Labor and Workforce Development Committee in support of H. 1603, which would create a competitive rating system in Massachusetts.

“This bill would allow insurers to compete on price based on their actual costs. The majority of states use this system including our neighboring New England states of Maine, New Hampshire and Vermont,” said Paul Moran, AIA vice president, Northeast Region.

This is how the system works. Approximately 70 percent of workers’ comp rates are established by the Workers’ Compensation Rating Board, and the remaining 30 percent or so consists of the insurance company loss cost multipliers, or LCMs, both of which must be approved by the Division of Insurance prior to use. Even though the LCMs will vary from company to company they represent the actual costs of doing business for insurers.

Peter McArdle, assistant vice president of industry and government relations, Acadia Insurance Company, delivered AIA’s testimony and told the committee, “In a state with a competitive loss cost system we compete with a combination of loss control services, claims service and price. Anyone can sell insurance on price, but to write workers’ compensation profitably over a long period of time, particularly the higher hazard classes, requires a major commitment to loss control to identify those businesses that are committed to operating safely.”