Analyst Upbeat On Calif. WC Market Future

NU Online News Service, April 1, 1:28 p.m. EST?The California workers' compensation market, after handing insurers disastrous losses, is now showing encouraging pricing trends that will allow carriers to make money, a securities firm analysis is predicting.

"We believe that upward rate momentum in the market through 2003 will permit carriers to achieve profitable results on new business," said the report by Hank Lauricella, an analyst in the San Francisco office of Cochran, Caronia, Securities LLC.

The report said the firm expects "that this developing opportunity will command the attention of a number of different insurers."

A key indicator that the volatile market has stabilized, Cochran found, would be renewed aggressive marketing by any of the large national carriers such as Liberty Mutual, Kemper or American International Group.

Cochran cited the fact that 16th-ranked American Financial, while substantially reducing its premium, had reported improvement in its California workers' comp book, including 35 percent rate increases.

The report noted recent history that has seen deregulation followed by increasing losses as intense competition drove prices below cost.

Cochran reported that several carriers, which for 2001 reported combined ratios in the 100-plus-mid-to-high teens, have taken substantial rate increases this year.

"For the industry overall, we believe achieving our estimated breakeven accident year combined ratio of 108 percent requires an approximate 30 percent rate increase over 2001 levels," the report stated.

Among other positive trends, the report found that the aggressive State Compensation Insurance Fund, which had a market share of nearly 40 percent in 2001 and has priced its business for a high loss ratio of 113.5, is now under capacity restrictions that will "limit its competitive zeal" while the fund builds surplus and reduces leverage.

The analysis mentioned as a significant positive change a portion of the latest revision in the state's workers' comp law which partially repeals the inability of insurers to challenge a doctor's findings concerning an injury under a presumption of correctness by the treating physician.

Other legislated changes in the California workers' comp system would:

? Create a fund to reimburses employers who meet certain criteria for getting injured workers back on the job sooner.

? Set fee schedules for outpatient surgical procedures and pharmaceuticals commonly used to treat injured workers.

? Reform healthcare organization programs with a provision giving 180-day control of treatment to employers offering a single healthcare organization, if they provide the employee with medical benefits. A 90-day control period would be in force where no health benefits are given.

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Analyst Upbeat On Calif. WC Market Future

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