Calif. Comp Insurers Rate Cut Vexes Garamendi

NU Online News Service, July 14, 3:42 p.m. EDT?Workers' compensation insurers are giving California employers a rate cut that is only half of what the state's top insurance regulator has recommended.[@@]

Insurance Commissioner John Garamendi said yesterday the latest rate filings show the cumulative, average, premium weighted, overall rate reduction for all companies is down 10.38 percent.

Based on recent workers' comp legislative reforms over the past two years, Mr. Garamendi had called for a cut of 20.9 percent in his May 28 pure premium rate advisory.

The insurance department said the 10.38 percent figure was arrived at by incorporating all the filings it received as of Monday for a cumulative, average, premium weighted, overall rate reduction for all companies.

If the State Compensation Insurance Fund is excluded from the figures, the rate reduction would have been 11.17 percent, the department said, adding that the difference of nearly 0.8 percent between the two figures represents approximately $115 million that would have stayed with California businesses.

"Workers' compensation rates are definitely on the down escalator, but the escalator needs to speed up," said Mr. Garamendi. "Greater savings are possible, especially from the State Compensation Insurance Fund. Their 9.7 percent reduction is far less than the two national companies--Republic Indemnity and Liberty Mutual."

According to the department, among the top-10 market share groups, the Republic Indemnity companies filed an average 20.48 percent rate reduction and the Liberty Mutual companies filed an average 17.54 percent rate reduction.

"I commend these industry vanguards for expressing their belief in the 2003 and 2004 reforms by giving rate relief to businesses as soon as possible," said Mr. Garamendi. "They are helping California's economy now, rather than hedging their bets against it. At the end of the day, California must have a healthier, more responsive SCIF if we are to continue turning the corner on this issue."

The commissioner noted that SCIF commands 53.03 percent of the workers' comp marketplace. By comparison, Republic Indemnity and Liberty Mutual companies represent a combined 4.04 percent. "I remain committed to working with the newly appointed, reform-minded board of directors to lower SCIF's rates while preserving its solvency," Mr. Garamendi said.

Last week the department issued a statutorily mandated report, which found that if SCIF were to adopt certain underwriting practice and rating plan recommendations contained in the report, redirected its investment portfolio, and reduced maximum commission rates, overall net savings of 5.9 percent could be realized. Those savings would be in addition to the 9.7 percent in reductions SCIF already filed during 2004.

The department said it expects to issue a report next month on SCIF's loss reserves. The department also recommended that the California Legislature and governor order an operational review of SCIF that includes claims handling.

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Calif. Comp Insurers Rate Cut Vexes Garamendi

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