Massachusetts rates for workers compensation insurance are set every other year in an administrative rate hearing before the Division of Insurance. Businesses in Massachusetts are required to purchase workers' comp insurance.

Attorney General Coakley said in a statement that, "By lowering the cost of workers' compensation insurance, we can continue to promote job growth in Massachusetts by attracting new businesses and allowing current businesses to grow. This settlement protects insurance customers and ensures that they do not overpay for workers compensation insurance."

In this year's rate proceeding, insurance companies sought an average rate increase of 4.5 percent, which would have cost employers more than $40 million in extra premium payments, Ms. Coakley's statement said.

She intervened in the rate proceeding, she said, to represent the interest of ratepayers, many of which are small businesses, and vowed to block the proposed rate hike.

The Attorney General's Office said she had worked with the State Rating Bureau of the Division of Insurance to review the industry's proposed rates, and determined that the proposal included "inflated projections of losses and future costs, among other infirmities, and that rates needed to be reduced below current levels so that they would not be excessive."

Paul Meagher, president of the Workers' Compensation Rating and Inspection Bureau of Massachusetts, the private, non-profit association of insurers, which files workers' comp rates on behalf of member insurers with the Division of Insurance, said in a statement, "In today's uncertain economic climate, maintaining a healthy voluntary market for workers' compensation insurance will likely be a challenge given the continuing increase in claims severity and low expected industry investment returns.

"The WCRIBMA is committed to working with its committees, members, regulators, and other stakeholders toward our shared goal of a stable and healthy workers' compensation market in the Commonwealth."

Besides the rate decrease the deal requires workers' comp insurance companies to undergo another rate review next year, so that the Attorney General and the State Rating Bureau may seek further rate reductions in 2011 as appropriate, her office said.

The settlement was submitted in the rate case yesterday, and will need final approval from the state commissioner of insurance.

The Attorney General's Insurance and Financial Services Division represent the public interest in rate trials, and advocates for fair rates for insurance customers.

Ms. Coakley's office said since January 2007, it has obtained over $200 Million in savings for employers and small businesses by intervening in workers' comp insurance administrative rate cases.