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The Pennsylvania Insurance Department and the Pennsylvania Compensation Rating Bureau have entered into a consent decree to lessen the chances of errors in the filing of loss costs and better protect businesses, Insurance Commissioner Jessica Altman said Tuesday.
In April 2018, the PCRB, an independent bureau that makes filings to the insurance department on behalf of the approximately 350 companies that write workers compensation insurance in the state, submitted a filing used to determine workers comp insurance rates for Pennsylvania businesses that contained an error. In December 2018, the state’s insurance department approved a midyear loss cost revision filing to correct that mistake beginning Jan. 1.
“The error in loss cost filings involved two insurers, Highmark Casualty which subsequently sold its workers compensation insurance business to BrickStreet, and resulted in incorrect information being used by the PCRB, resulting in some businesses paying higher rates than they should have,” Ms. Altman said in a statement.
An investigation determined that the incorrect reporting of loss cost data and its subsequent approval by the PCRB occurred due to insufficient internal controls at both insurers and the PCRB.
To reduce the chance of a similar error impacting the state’s businesses in the future, the consent decree between the insurance department and the PCRB requires that the PCRB retain an outside auditor approved by the insurance department to conduct a full audit of the PCRB’s business practices, including its internal controls. The auditor will also issue a report, along with recommendations for changes and improvements, with the agreement that PCRB will adopt the recommendations unless specifically waived by the insurance department.
The decree also enables the insurance department to conduct an examination — at PCRB expense — to verify that the report’s recommendations have been adopted within two years.
The consent order with BrickStreet includes the same terms for both auditing and verification contained in the PCRB consent order, as well as $80,000 fine. Highmark Casualty has agreed to pay a $145,000 fine for failing to have sufficient internal controls, but since Highmark has sold its workers compensation insurance business to BrickStreet and is no longer in the line of business in Pennsylvania, there are no audit or examination requirements.
Along with approving the midyear loss cost revision in December, Ms. Altman urged all workers compensation insurers doing business in Pennsylvania to take action to reimburse any businesses that were overcharged because of the earlier filing, noting reimbursements amounts would vary based on job classifications. Pennsylvania’s State Workers’ Insurance Fund has already reimbursed any workers compensation overpayments, returning approximately $10 million to businesses in the state, according to the release.
To date, 90 workers compensation insurers writing approximately $660 million in annual premiums have reimbursed their business customers.
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