Pinnacol Assurance, Colorado’s largest workers’ compensation insurer, will have to give back to policyholders at least $15 million and pay a separate fine after state regulators found the insurer improperly set rates for eight years.
The settlement announced Tuesday came the day before the Colorado Division of Insurance was to hold what was expected to be a well-attended public hearing on Pinnacol’s insurance rates. Insurance regulators on Monday canceled the hearing after reaching a tentative settlement with Pinnacol.
Pinnacol is a quasi-governmental agency that operates like a private company but has a board appointed by the governor and enjoys special tax breaks.
Pinnacol has been scrutinized the past two years by lawmakers looking at its hefty assets and the sometimes lavish spending on meals and trips for Pinnacol executives. A state audit earlier this year said the expenses “border on abuse” and questioned a number of factors Pinnacol had used in setting rates.
“We have come to an agreement that the Division of Insurance believes will provide relief to Pinnacol policyholders,” Commissioner of Insurance Marcy Morrison said in a statement. “Because Pinnacol is the workers’ compensation insurer of last resort in Colorado, employers who are Pinnacol policyholders often accept the rates without question or complaint.
“It’s important that the Division of Insurance maintain its vigilance to be sure that rates are not excessive, inadequate or unfairly discriminatory.”
The settlement calls for Pinnacol to pay policyholders a minimum of $15 million against premiums in 2011. The payments would apply only to policyholders who are “schedule-rated,” or those whose rates take into account individualized factors such as whether an employer has implemented a safety program or has unusually high risks.
Pinnacol also agreed to pay $80,000 in civil penalties, representing $10,000 a year for violations in which the insurer used rate-setting factors it had not filed with regulators. In a statement, Pinnacol said the violations stemmed from a 2002 “oversight” in which a rate-setting factor was not filed with insurance regulators.
“We now have a director of corporate compliance who is responsible for all aspects of regulatory compliance, including all necessary filings required by the DOI,” said Dan O’Neil, Pinnacol’s vice president of business operations and general counsel. “Having an individual on staff with those responsibilities will ensure that this type of filing oversight does not happen again.”
Tim Hoover: 303-954-1626 or thoover@denverpost.com
