Calif. Comp Fund Lashes Back At DOI

Mr. Bollier responded that most of Commissioner Harry Low's directives "would lead to draconian price increases for thousands of California employers" as well as exceeding what "State Fund needs to achieve surplus adequacy."

Compliance with Mr. Low's "egregious and unwarranted directive is a recipe for economic disaster" that will result in "horrendous" increases in workers' compensation costs for "all" California employers, he predicted.

Jim Zelinski, State Fund spokesman, explained that the letter was issued to make sure "our employee policyholders and their injured workers had accurate information. We wanted to set the record straight that State Fund is financially stable and will be here in the long-haul."

Mr. Zelinski said State Fund has approximately 260,000 policyholders.

State Fund's next step, he said, is to respond to Mr. Low's request by "addressing all of the issues raised by the deadline."

He continued that, "We share his concern over the volatility of the market and certainly concur with him that State Fund is vital to insuring a healthy workers' comp system."

State Fund, he said, is studying Mr. Low's recommendations. However, he emphasized, "It was mandated that State Fund must be fairly competitive to insure stability in the workers' compensation insurance system in California."

Regarding the letter's statement that complying with Mr. Low's requests would lead to price increases, he said State Fund does "plan on a rate increase on July 1." He could not discuss details, he said, because the department of insurance has not yet approved the rate.

Mr. Low's letter, released in the context of the Freedom of Information Act and dated May 29, called for State Fund's plan to be delivered to the department by June 14 and said the plan must demonstrate that SCIF "will improve its surplus level, as well as its leverage ratios and RBC by year-end 2002."

In the letter, Mr. Low urged SCIF to "strongly consider" that its plan include options to increase premium rates; eliminate the large credits and discounts currently offered to large accounts; pay no policyholder dividends for the foreseeable future; reduce or eliminate the amount of commissions paid by producers; and eliminate advertising and other marketing expenses.

He also advocated selectively terminating agents that produce unprofitable business and practicing "insurer of last resort" philosophy, as well as only accepting accounts that are unable to procure workers' compensation coverage elsewhere.

State Fund said in its policyholder letter that it carried out its role as "an always-available market and a fairly competitive carrier" by maintaining underwriting standards, giving brokers and agents "expanded access," and only gradually increasing prices to California employers.