HONG KONG -- Beset by workers compensation premium increases for the past five years, Hong Kong employers may get a reprieve but still have some work to do.

More claims litigation, combined with higher court awards and a statutory increase in benefits since 1993, have been largely responsible for a 40% rise in premiums over the past five years, an insurance executive says.

Rising levels of court-awarded compensation and benefits to employees make premium increases essential, said Leo Ma, chairman of the Accident Insurance Assn. of Hong Kong, and assistant general manager for Prudential Assurance Co. Ltd., Hong Kong.

In addition, court decisions for years have shown a bias in favor of injured workers, "and this is still the case," he said.

Another factor in the increases is Hong Kong's overburdened court system, which in July prompted Hong Kong's chief justice to issue a directive encouraging lawyers to seek out-of-court settlements.

The directive is the latest attempt by government administrators over the past five years to ease pressure on Hong Kong's court system, according to Mr. Ma.

Meanwhile, the government is requiring employers to address the root of the claims problem by taking steps to reduce workplace accidents.

The Occupational Health & Safety Ordinance, which was enacted in 1997, requires employers to increase workplace safety measures, said Flora Loh, information officer for the Hong Kong Labor Department, which regulates workplace issues.

Ms. Loh said the new law also stiffens penalties, with fines ranging from $10,000 Hong Kong to $500,000 Hong Kong ($1,291 to $64,550). Violators in more hazardous work situations can receive prison terms of up to 12 months.

Over the past five years, the average fine for contravening health and safety legislation on construction sites has increased from $7,923 Hong Kong to $25,698 Hong Kong ($1,023 to $3,318). For other industrial operations, the average fine has increased from $4,095 Hong Kong to $10,450 Hong Kong ($529 to $1,349) over the same period.

Hong Kong's most recent revision of workers compensation levels went into effect Aug. 1, 1998. The current maximum death benefit in Hong Kong is now $2,016,000 Hong Kong, compared with $163,044 Hong Kong ($260,266 from $21,049) in 1993.

Compensation for permanent, total incapacity also increased in August to a maximum of $1,764,000 Hong Kong ($227,732), compared with $540,000 Hong Kong ($69,714) in 1993.

The Accident Insurance Assn. recommends a 2% base rate increase in premiums to its members, but does not expect them to raise premiums.

"You have to remember we have a very aggressive free-market economy here in Hong Kong at the best of times, and currently the region is in financial turmoil, so there is massive competition for premiums," Mr. Ma said.

As early as 1993, employers suggested the Hong Kong Legislative Council could use premium increases as a reason to dump the privately run workers comp program.

Mr. Ma confirmed that a transition to a statutory, government-run program was supported by the Department of Labor and labor unions in Hong Kong.

However, he said there are "no indications of further legislative changes in regard to the workers legislation, and neither is there anything to indicate a change in direction regarding the industry since the government handover in July 1997."