Garamendi Cuts Calif. Comp Advisory Rate 20.9%

NU Online News Service, May 28, 3:55 p.m.EDT?California Insurance Commissioner John Garamendiannounced today he will lower the advisory pure premium rate forworkers' compensation insurance by 20.9 percent.[@@]

The department said this is "a clear signal that substantialsavings from system reform are available to provide relief toemployers currently paying the highest premiums in the nation."

According to the department, the recommendation from thecommissioner represents the impact of the estimated $5.5 billion insavings from last year's reform as well as the impact of thisyear's reform, estimated to save $2.25 billion.

However, insurers are not bound to follow, the recommendationand two days ago Zenith, the state's fourth largest comp insurer,filed for a reduction of only 10 percent. The carrier's president,Stanley Zax told National Underwriter that Mr. Garamendi andWorkers' Compensation Insurance Rating Bureau the state'sstatistical agent, which recommended a 15 percent reduction, "arenot dealing with reality."

Commissioner Garamendi's decision , which insurers use as abenchmark, will affect policies issued or renewed on and after July1, which the department said could have a significant impact onemployer premiums for many businesses this year.

"The tremendous savings from these reforms will rejuvenateCalifornia's economy by reducing employer premiums, and providingbetter and more appropriate medical care to our injured workers,"Mr. Garamendi said. "But our work is not finished. We must now doeverything in our power to ensure that all of the savings go topremium relief for employers, and not to insurers' bottomlines."

Mr. Garamendi made the announcement at A-1 Door & BusinessSolutions in Sacramento. His department's announcement noted thatemployers have seen their premium rates skyrocket over the pastseveral years primarily due to out of control medical costs andgeneral system dysfunction.