Analysts: Garamendi Lowers Comp Outlook

The California Applicants' Attorneys' Association and Voters Injured At Work representing workers have been complaining that a new disability schedule improperly reduces benefits.

Mr. Garamendi said he had listened to complaints from across the state that injured workers were losing benefits even as insurers were reaping large profits in the wake of legislative reforms to the workers' comp system in 2003 and 2004.

He said employers large and small have told him that they have not seen the reduction in premiums that savings from legislative reforms would lead one to expect.

Mr. Garamendi said this leads him to ask whether injured workers are receiving the benefits they are entitled to, are they unjustly denied treatment and benefits, and why aren't insurers sharing savings from comp reforms with employers?

The amount of workers' comp carrier premium that goes to pay injured worker treatment and benefits, measured by their loss ratio, has dropped to 45 percent of the premium dollar, according to Mr. Garamendi.

He promised that if claims are not handled properly under the new laws, "we will take action to ensure that the guidelines are adhered to more closely."

A spokesman for the commissioner, Norman D. Williams, said Mr. Garamendi could invoke insurance code section 90.3, which regulates the market conduct bureau and covers a range of prohibited acts such as misrepresenting terms of a policy by "telling people they don't have rights to benefits when they do."

Mr. Garamendi also promised to look into why comp premium amounts rose 11 percent while the cost of claims fell 15 percent.

He said he would also investigate the State Compensation Insurance Fund–the state-owned entity that insures 50 percent of the market–to see if it is passing on savings properly.

Banc of America said that SCIF had a 95.7 combined ratio last year and is a major competitor to the private sector.

In light of that competition and pressure from Mr. Garamendi, " California workers' comp insurance is likely to become less attractive and profitability will likely erode," the analysts wrote.